Thread Content
Coal-to-natural gas companies call for policy support Author/Source: China Chemical Industry News Date: 10-19-2018 Clicks: 2 As the heating season in the north approaches, ensuring a sufficient supply of natural gas has once again become a priority for the oil and gas industry, with gas suppliers accelerating their production plans. However, at the 2018 China International Coal Chemicals Development Forum, which concluded on September 17, the coal-to-natural gas industry presented a different picture: constrained by issues such as the supply of raw coal, natural gas transmission infrastructure, and price mechanisms, these companies are currently suffering from severe losses. Those already in operation lack enthusiasm for production, while upcoming projects are considering switching to other types of production; newly approved projects are on hold, with no substantial progress being made. “The coal-to-gas projects themselves pose no issues in terms of safety and stability, technical reliability, or compliance with environmental emission standards. What primarily affects the economic viability of these enterprises are the prices of coal and natural gas; it is therefore called for that, from an energy security perspective, appropriate policy support be provided to coal-to-gas companies. ”Several experts said at the forum. Since the beginning of this year, the gradual rise in international oil prices has led to an improvement in the overall performance of the coal chemical industry; some industries that had been suffering losses for a long time have managed to turn a profit. Yet even so, coal-to-gas enterprises continue to face difficulties. “Among the four coal-to-gas plants that are currently in commercial operation – Datang Keqi, Xinjiang Qinghua, Yili Xintian, and Inner Mongolia HuiNeng – only HuiNeng was able to turn a profit, thanks to its low production volume and the fact that its product is LNG, which allowed it to take advantage of the market conditions at the end of last year. The other three plants, which rely on pipeline transportation, have suffered losses regardless of whether there is a shortage or surplus in the natural gas market. “Wu Xiuzhang, vice general manager of Datang Group and general manager of Sino-Singapore New Energy Chemicals Company, said. “Affected by factors such as low prices at natural gas distribution stations in recent years, rising coal prices, the lack of independent long-distance pipeline networks, and a limited range of products, coal-to-gas companies have been operating at a loss for a long time; it is hoped that the economic viability of such projects will draw the attention of relevant authorities. “Hu Qianlin, secretary-general of the Coal Chemicals Committee of the China Petroleum and Chemical Industry Federation, said. “Fluctuations in coal prices have a significant impact on the costs of coal-to-gas production. The policy to reduce coal production capacity led to coal prices rising by 150 yuan per ton compared to the beginning of the 13th Five-Year Plan period, which in turn increased the cost of coal-to-gas production by about 0.45 yuan per cubic meter, **reducing the economic viability of such projects. At the same time, the pipeline networks for coal-to-gas projects have faced obstacles, and the pipelines planned for coal-to-natural gas projects in areas such as Zhundong and Ordos have not been constructed either, which has also affected the profitability of these coal-to-gas projects. ”Gu Zongqin, director of the Petroleum and Chemical Industry Planning Institute, analyzed and pointed out. Coal-to-gas products are very limited in variety, and their pricing determines the cost of these products, which is also a major reason for the poor economic viability of coal-to-gas projects. Over the years, energy prices have fluctuated greatly: coal prices rose from 300 yuan per ton to 600 yuan per ton, while crude oil prices increased from over 40 dollars per barrel to 80 dollars per barrel. However, natural gas prices have remained unchanged for three years. ”Taking the Datang Keqi project as an example, the gas price at the start of construction was 2.72 yuan per cubic meter; it has dropped twice so far, and is now 1.77 yuan per cubic meter. This is still the price applicable for delivery to Beijing, including pipeline fees, and it is the price agreed upon with CNPC. Coal-to-gas projects produce a single type of product that cannot be stored, and demand for natural gas is highly seasonal. Restricted by long-distance pipeline networks, these enterprises lack the capability to adjust production in response to market conditions. Although 80% of the work on our second production line has been completed, we still dare not start operations yet. Currently, it is being considered to separate some of the methane produced in the gasification process to produce natural gas, while using the remaining syngas to manufacture methanol and ethylene glycol – this is a last resort. ”Wu Xiuzhang said. It is understood that the plan to shift production in subsequent projects within coal-to-gas enterprises is not an isolated case; for example, Qinghua Group is also considering switching its second production line from producing natural gas to manufacturing other chemical products. Industry experts agree that China’s natural gas consumption is rising year by year, with its reliance on imports approaching 40%; this year, China has become the world’s largest importer of natural gas. As an effective supplement to traditional domestic gas sources, coal-to-gas has great potential for development. However, this is possible only if the economic viability of such projects is ensured and if the market environment can attract more companies to get involved; all of these require the introduction of **effective support policies.