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To promote the implementation of the \"13th Five-Year Plan for the Demonstration of Advanced Coal Processing Industries,\" the Northwest Energy Regulatory Bureau recently visited Shaanxi Future Energy Chemical Co., Ltd. (hereinafter referred to as \"Future Energy\") to conduct a survey on the progress of the coal indirect liquefaction demonstration project (hereinafter referred to as the \"coal-to-oil project\"). It inspected the operations of the 1-million-ton-per-year low-temperature Fischer-Tropsch synthesis coal indirect liquefaction demonstration project and the 100,000-ton-per-year high-temperature Fischer-Tropsch synthesis coal indirect liquefaction demonstration facility. The bureau exchanged views with the company regarding production and operation, technical processes, overall energy consumption, product structure, product sales, project development plans, as well as the current problems, difficulties, and challenges faced by the coal-to-oil industry. It also heard the company’s opinions and suggestions on the development of this industry. Text | **Research on the Construction and Operation Status of Project 1 by the Northwest Regulatory Bureau of the National Energy Administration** The project is located in the Yuheng Industrial Park, Yuyang District, Yulin City, Shaanxi Province, and is being constructed and operated by Future Energy. The future energy project will be established by Yankuang Group, Yanzhou Coal Industry, and Yan’an Petroleum with equity shares of 50%, 25%, and 25% respectively. The overall plan calls for the phased development of this project in three stages, with the goal of achieving an annual production capacity of 10 million tons of oil products and chemicals through efficient and clean utilization of coal. To date, the first-phase demonstration project for coal indirect liquefaction via low-temperature Fischer-Tropsch synthesis with an annual capacity of 1 million tons, as well as a demonstration unit for this process using high-temperature Fischer-Tropsch synthesis with an annual capacity of 100,000 tons, have been built and put into operation. Preparatory work is currently underway for the second phase of this project, which involves coal indirect liquefaction via low-temperature + high-temperature Fischer-Tropsch synthesis with an annual capacity of 4 million tons. Status of the Phase 1 1 million tons/year low-temperature Fischer-Tropsch coal indirect liquefaction demonstration project: This project is part of the **12th Five-Year Plan’s coal deep-processing demonstration projects. It covers an area of 303 hectares and is designed to produce 1.15 million tons of petroleum products per year, including 790,000 tons of synthetic diesel, 260,000 tons of naphtha, and 100,000 tons of liquefied petroleum gas; it involves the conversion of 5 million tons of coal per year. Construction of the project began in July 2012; all units were completed in June 2015. In August of the same year, the entire production process was operationalized, and the trial run was successful with a single batch of material used. The total investment incurred was 14 billion yuan. To date, the entire project has achieved safe, stable, and long-term operation. The Jinchitang Coal Mine, which serves as a complementary resource, is located in Yuyang District, Yulin, Shaanxi. It has geological reserves of 1.872 billion tons, with extractable reserves of 978 million tons. The main types of coal here are long-flame coal and non-stick coal; the coal seams are stable in structure, and the hydrogeological conditions are simple. The coal mine was designed with a capacity of 8 million tons per year; construction began in April 2012 and it came online in July 2014, with a coal washing plant of the same scale being built and put into operation at the same time. In July 2018, the mine’s capacity was increased to 15 million tons per year. The technical level is relatively advanced. The successful operation of this project marked the first time in the country that industrialization of million-ton-scale autonomous coal indirect liquefaction technology was achieved. Technologically, the project relies on Shanghai Yankuang Energy Technology Co., Ltd., utilizing its proprietary 1-million-ton-class low-temperature Fischer-Tropsch synthesis technology and oil stabilization hydrogenation technology. The Fischer-Tropsch synthesis reactor and the oil upgrading unit are among the largest of their kind in China at present. They feature high diesel selectivity, low catalyst consumption per ton of oil produced, high production efficiency in the Fischer-Tropsch synthesis reactor, and high energy utilization efficiency, reaching a level that is \"leading in China and advanced internationally\". The project has also undertaken 5 projects under the **\"863\" Program**, 2 projects under the **\"973\" Program**, obtained 43 patents, and achieved 11 **national-level** results. The degree of equipment autonomy is high. The main equipment of the project includes 4 air separation units with a capacity of 85,000 standard cubic meters per hour each, 8 multi-nozzle opposed-flow pressurized coal-water slurry gasifiers (6 in operation and 2 on standby), each capable of processing 2,000 tons of coal per day; 3 carbon monoxide shift units; 3 Rectisol units with a gas processing capacity of 270,000 standard cubic meters per hour; 2 sulfur recovery units; 1 Fischer-Tropsch synthesis unit; 1 unit for processing Fischer-Tropsch synthetic oil products; 1 tail-gas hydrogen production unit; 3 high-pressure pulverized coal boilers with a steam output of 480 tons per hour each; and a Fischer-Tropsch catalyst production facility with an annual capacity of 3,000 tons, among others. There are over 500 units of large-scale equipment in total. Based on the investment amount, the degree of localization of the equipment used in this project is over 82%, while based on the number of equipment units, it is over 92%. The product is of high quality. The project mainly produces diesel, gasoline, olefins, paraffins, lubricating oils, surfactants, high-carbon alcohols, and other chemical products. The oil products manufactured contain no sulfur, nitrogen, or aromatic compounds; the cetane number of light diesel is 81, while that of heavy diesel is 79. The key parameters meet or exceed the Euro V standards. The resource consumption metrics meet the requirements. Operational data show that the project consumes 3.44 tons of standard coal per ton of oil used, 44.57 kwh of electricity, and 7 tons of water; the reuse rate of water is 98.26%. The carbon dioxide emissions per ton of oil produced are 4.93 tons, with a carbon conversion rate of 98%–99%. The overall energy utilization efficiency is 45.9%, which meets the requirements regarding energy efficiency and resource consumption set out in the \"13th Five-Year Plan for Advanced Coal Processing\" (see Table 1). https://mpt.135editor.com/mmbiz_png/0VDErxTeMLticGCVfD5gfdQEmcWR1cgYicjotrKKTeRCmKWN88qibNc90fWYqFwW0Ns46fnKqK5X52VUYiancQVqLA/640?wx_fmt=png Significant achievements have been made in energy conservation and emission reduction. The investment in energy conservation and environmental protection for this project amounted to 1.81 billion yuan, accounting for 11.04% of the total investment. Environmental protection facilities and devices such as sewage treatment, waste gas treatment, noise pollution control, solid waste disposal, gas power generation, and waste heat power generation have been built and put into use; sewage treatment has achieved zero emissions, with the compliance rate for pollutant discharge reaching 100%. The project makes extensive use of air coolers as cooling devices for turbines and industrial processes, effectively replacing the circulating water cooling method. This approach allows for a savings of 13.49 million cubic meters of fresh water per year in terms of evaporation, with a reuse rate of water resources reaching 98.26%. The project makes full use of waste heat and exhaust gas to generate electricity; 3 sets of 50MW waste heat generators and 1 set of 42MW gas generator have been installed and are operating stably. While meeting the project’s own power demand of around 80–100MW per hour, it is also able to supply approximately 30–50MW of electricity to the grid, thereby contributing to energy savings and emission reduction. Status of the follow-up project for Phase 1: The 100,000 tons/year demonstration plant for indirect coal liquefaction via high-temperature Fischer-Tropsch synthesis. In June 2017, an industrial demonstration unit for high-temperature Fischer-Tropsch synthesis with a capacity of 100,000 tons was also built as part of the first phase of the project, and its trial operation was successful on September 19, 2018, with a single batch of feedstock used. This is China’s first industrial demonstration plant for high-temperature Fischer-Tropsch synthesis that was developed independently with full ownership of intellectual property rights. Its completion and operation have laid a technical foundation for the construction of million-ton-scale industrial plants in China, and it also signifies that high-temperature Fischer-Tropsch synthesis technology now meets all the requirements for industrial application. The project mainly consists of two units: high-temperature Fischer-Tropsch synthesis and catalyst reduction. The main raw materials and utilities are sourced from the first-phase 1-million-ton coal indirect liquefaction project. Products such as high-temperature condensates and low-temperature condensates generated from the Fischer-Tropsch synthesis are sent to the oil processing unit in the first phase. This technology innovatively uses an iron-based catalyst and a fixed fluidized-bed reactor; the Fischer-Tropsch synthesis takes place at high temperatures, allowing for the generation of high-quality steam at 4.0 MPa, which facilitates the comprehensive utilization of energy and reduces the energy consumption per unit of product. Operational data shows that the reaction temperature in this demonstration unit ranges from 300°C to 370°C; the conversion rate of carbon monoxide exceeds 99%, while the conversion rate of syngas reaches 92%. The carbon number distribution of the synthesized products is relatively narrow, and the olefin content is high. This enables the production of fine chemicals and specialty chemicals that are difficult to obtain through conventional petrochemical routes. The successful demonstration operation of this facility also provided technical validation for the subsequent 4-million-ton/year phase I project on indirect coal liquefaction. 4 million tons/year low-temperature + high-temperature Fischer-Tropsch coal indirect liquefaction project. “During the 13th Five-Year Plan period, building on the existing 1-million-ton/year coal indirect liquefaction demonstration project, Future Energy will undertake Phase I of a subsequent 4-million-ton/year coal indirect liquefaction project, along with the construction of the 10-million-ton/year Xihongdun Coal Mine. The total planned investment is approximately 83 billion yuan. The project will utilize large-scale high- and low-temperature Fischer-Tropsch multi-product technologies; there will be two production lines each for high- and low-temperature Fischer-Tropsch processes, while one production line will be set up for processing oil products and chemicals at a capacity of 4 million tons per year. The core facilities include a 2 million tons/year high-temperature Fischer-Tropsch synthesis demonstration plant and a 2 million tons/year low-temperature Fischer-Tropsch synthesis co-production plant. Further extend the industrial chain and optimize the product structure, while producing 28 high-quality oils such as gasoline, diesel, aviation fuel, and lubricant base oils, as well as chemicals with high added value. By then, an annual coal indirect liquefaction capacity of 5 million tons will be established, making it the largest coal indirect liquefaction facility in the country. Currently, the preliminary work for the follow-up project of Phase 1 is underway; construction is expected to begin in 2019 and completion and operation are scheduled for 2022. The demonstration effect of the first-phase project: The 1 million tons per year low-temperature Fischer-Tropsch synthesis coal indirect liquefaction demonstration project demonstrated significant effectiveness and strong technical leadership; it promoted the economic transformation of the region, laid the foundation for the industrial development of coal-to-oil production, and held great significance for advancing the growth of China’s coal-to-oil industry. The complete set of technologies for large-scale indirect coal liquefaction has been mastered. Through the implementation of this project, Future Energy Company has optimized and integrated various unit technologies such as coal gasification, purification, Fischer-Tropsch synthesis, and oil upgrading. It has also mastered the complete set of technologies for large-scale indirect coal liquefaction, including high-efficiency low-temperature Fischer-Tropsch synthesis catalyst technology and a large-scale low-temperature Fischer-Tropsch process primarily aimed at producing oil products. It possesses the capability to design and manufacture large-scale reactors. During the implementation of this project, a series of challenges were overcome in the design, construction, and installation of large-scale slurry-bed reactors for low-temperature Fischer-Tropsch synthesis; knowledge was gained regarding large low-temperature Fischer-Tropsch synthesis reactors and their internal components. **This contributed to the improvement of the technical skills in welding, heat treatment, forging, and lifting among China’s large chemical equipment manufacturing enterprises. It has improved the levels of project management and construction. The project has initially established a standardized and orderly operation mechanism as well as an effective talent development system; through strict management in terms of schedule control, budget management, quality supervision, and design optimization, it has **improved the levels of project management, construction quality, and investment control. It took only 3 years from the start of construction to completion; the estimated investment was 16.4 billion yuan, while the actual investment amount was 14 billion yuan, resulting in savings of 2.4 billion yuan. This approach ensured high-quality construction, rapid progress, and cost efficiency. Innovated investment cooperation and business operation models. To alleviate the pressures of high investment costs and difficulties in financing for coal-to-oil projects, Future Energy Company has brought in partners to improve the operation and management of its facilities. Among them, the treatment of production wastewater is carried out under the BOT business operation model, with Botian Environment responsible for its construction and operation ； The air separation unit of this project adopts a third-party gas supply model and was constructed by the American company AP; the price of oxygen is below 0.3 yuan per Nm3, resulting in low overall operating costs and significant advantages in terms of the unit’s operational lifespan. 3. Problems, difficulties, and challenges: At present, the annual production volume of the 1 million tons/year demonstration project for indirect coal liquefaction via low-temperature Fischer-Tropsch synthesis is only 500,000 tons. Although it has been able to operate safely, stably, over long periods of time at a certain load level, it has not reached its planned production levels nor its profit targets. Based on an understanding of projects already implemented in China, as of September this year, the country’s coal-to-oil production capacity reached 9.21 million tons per year, representing a 214.3% increase since the beginning of the 13th Five-Year Plan period. However, most of these projects are operating at a loss. The main reasons include limitations in technology and process flows, insufficient development of the industrial chain, the impact of crude oil and coal prices, restrictions imposed by taxes and fees on refined oil products, and adjustments in China’s energy structure. These factors encompass both external environmental influences and issues inherent to the projects themselves. As an emerging industry, coal-to-oil production is still in its initial stage of industrialization and faces numerous problems, difficulties, and challenges. Oil, gas, and coal prices have a significant impact on the development of the coal-to-oil industry. Firstly, the supply and demand in the international oil and gas market are currently relatively relaxed, with prices remaining low. The export of low-cost oil and gas products from the Middle East and North America is increasing, which has a significant impact on the coal-to-oil industry ； Secondly, as the structural reforms on the supply side in China’s coal industry advance, coal prices remain high, which forces the coal-to-oil industry, which relies on coal as a raw material, to reduce its production capacity; in some cases, the coal produced from associated coal mines is sold directly to help offset the operational pressures faced by these coal-to-oil projects. The adjustment of the energy structure may reduce the development prospects for the coal-to-oil industry. With the profound adjustment of the international energy supply and demand landscape, the energy structure is shifting toward cleaner and lower-carbon alternatives. Taking electric vehicles as an example, global sales of electric vehicles are expected to rise to 11 million units in 2025, 30 million units in 2030, and 60 million units in 2040. China is the world’s largest automotive market, accounting for 30% of global sales. The development of electric vehicles and hydrogen-powered vehicles will undoubtedly trigger a chain reaction. Coupled with the widespread use of non-fossil energy sources, this will further increase the uncertainties surrounding the development of the coal-to-liquid industry. Product costs remain high, and the level of technology and equipment needs to be improved. Firstly, most of the coal-to-oil projects that have been built or are under construction in our country use indirect liquefaction technology. Among these, the high-temperature Fischer-Tropsch synthesis process is still in the stage of technical validation, while the low-temperature Fischer-Tropsch synthesis process represents the current mainstream technology. Although this technology has become more mature, there is insufficient optimization and integration of the systems, as well as inadequate coordination between the various process units and equipment. At the same time, due to technical and equipment limitations, the coal-to-oil industry chain cannot be expanded sufficiently, which restricts product diversification and results in high costs per ton of oil produced ； Secondly, the investment costs for coal-to-oil projects are much higher than those of traditional refining projects of similar scale. For example, the actual investment in the Future Energy 1 million tons per year coal indirect liquefaction demonstration project amounted to 14 billion yuan, while the total investment for the PetroChina Tiandong 1 million tons per year refinery of similar scale during the same period was only a little over 300 million yuan. Such high investment levels result in a longer payback period. The current fuel tax and fee policy has weakened the competitiveness of coal-to-oil products. The coal-to-oil industry requires high initial investments and has a long cost recovery period, which puts it at a disadvantage in market competition. Under the current tax and fee policies, the coal-to-liquid industry must pay the same consumption tax on refined oil products as the traditional oil refining industry. When international oil prices remain low, raising this consumption tax—aimed at preventing excessive consumption and environmental pollution—only serves to exacerbate the already heavy financial burden on the coal-to-liquid industry during its initial stages of development. Management experience limits the refinement of project operation management. Most of the entities responsible for these demonstration projects come from sectors such as coal, power generation, and traditional chemical manufacturing; these companies have a long history and need to employ a large number of people internally. The demonstration projects help to meet some of these employment needs, but there is a lack of experience in coal-to-oil production. At the same time, there is insufficient in-depth research on the technology-intensive and complex coal deep-processing industry, leaving limited experience available for reference in terms of construction and operational management. 4. Suggestions and recommendations: Build confidence, remain unwavering, and pursue development with determination. Although the coal-to-oil industry has faced many difficulties in its development and there are certain uncertainties ahead, we must adopt a perspective centered on **science and technology strategies, energy strategies, and energy structure adjustments, maintain confidence, stay firm, and pursue its development unwaveringly. Firstly, developing the coal-to-oil industry is a strategic necessity for our country. China’s resource structure, characterized by abundant coal and limited oil reserves, its high dependence on imported crude oil, and the necessity of clean coal utilization, all determine that the country must develop coal-to-oil technology. Moreover, this industry can drive regional economic transformation as well as the development of related technologies and equipment manufacturing sectors, thereby helping to improve China’s level of scientific and technological innovation and enabling the country to gain an advantage in this field. Secondly, international and domestic experience shows that the coal-to-oil industry has great potential to develop high-end fine chemicals through the extension of its industrial chain. The Sasol coal-to-liquids project in South Africa has consistently achieved good profitability, thanks to its abundance of high-value fine chemicals. The Yitai 160,000-ton/year coal-to-liquids project in Inner Mongolia has also realized decent profits by extending its industrial chain. Implement the plan, strictly control production capacity, and advance in an orderly manner. Strictly implement the \"13th Five-Year Plan for Demonstrating Advanced Coal Processing Industries\"; take demonstration projects as a starting point, determine the pace of industry development based on the progress of technological advancement, give full play to the leading role of such demonstration projects, enforce strict entry requirements, and strictly control the expansion of production capacity. At the same time, it is necessary to strengthen supervision during and after project implementation, regulate the order of project construction, and prevent phenomena such as approving projects on a smaller scale than intended and experiencing delays in progress. Independent innovation, adherence to standards, and green development. First, it is necessary to implement the innovation-driven development strategy, regarding independent innovation as the primary driving force for the sustainable development of the coal-to-oil industry. Efforts should be made to strengthen original innovation, integrated innovation, and innovation through the introduction, adaptation, and further development of external technologies. Through technological innovation and industrial testing, the process technologies for high-value-added products can be improved. An industrial model that combines high- and low-temperature Fischer-Tropsch synthesis should be developed in order to extend the value chain of fine chemicals and broaden their market prospects ； Second, it is necessary to adhere to high standards, strict requirements, and a high level of ambition, striving to surpass others in terms of construction, scale, production, management, and efficiency, thereby continuously enhancing competitiveness as well as the conversion rate and efficiency of coal ； Third, resource and environmental carrying capacity are taken as prerequisites for industrial development; efforts are made to strengthen ecological and environmental protection, give equal emphasis to planning environmental impact assessments and environmental impact assessments for construction projects, enforce strict environmental protection standards, and strive to achieve green development. Policy support to promote industrial development. First, summarize successful practices and develop industry standards for safety, production, quality, environmental protection, etc., to promote improvements in project construction, technology, products, and the industry as a whole ； Secondly, **policies should be introduced to provide appropriate subsidies for coal-to-oil products in order to encourage the development of new industries; the oil product storage system should be improved, with coal-to-oil products included in the **oil storage list, thereby enhancing the emergency response capacity for oil and gas reserves** ； Thirdly, in response to the challenges faced by the coal-to-oil industry at present, a consumption tax specific to this industry has been introduced; such tax is exempted when crude oil prices are below a certain level. When crude oil prices rise, a tiered taxation system can be implemented based on the overall profitability of the coal-to-oil industry, thereby enhancing its adaptability in the market ； Fourth, in line with the coal-to-chemicals integration model, coal resources sufficient for production needs are provided for coal-to-oil projects, ensuring a stable supply of raw materials for coal-to-oil production and reducing the risks associated with fluctuations in the coal market ； Fifth, draw on the experience of electricity market reform to advance reforms in the oil and gas sector and promote market-based trading of coal-to-oil products. A comprehensive approach should be adopted to formulate policies that allow coal-to-oil enterprises to apply for qualifications for the wholesale and retail of refined oil products, as well as for the construction and operation of oil storage and transportation facilities and gas stations, thereby reducing costs for both parties involved in transactions. Strengthen industry regulation to promote the healthy development of the sector. First, it is necessary to regulate the operational supervision of coal-to-oil projects by setting strict requirements for coal conversion rates and a maximum limit on the volume of coal that can be sold directly, thereby preventing associated coal mines from being driven by profit motives to sell large quantities of coal externally. And conduct a comprehensive financial assessment of the coal-to-oil project (including the associated coal mines) in order to evaluate the overall financial condition of the project ； Second, standardize the sales channels for coal-to-oil products, and punish market-distorting practices such as local refineries mixing coal-to-oil products with other materials to improve their quality before selling them ； Third, a assessment mechanism for coal-to-oil projects should be established, whereby aspects such as the construction timeline, scale, technological advancement, degree of domestic equipment use, operating costs, profits, and environmental protection are evaluated one by one, in order to promote the standardized and healthy development of the coal-to-oil industry.