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Successful commissioning of Baofeng Energy’s 105,000 cubic meter per day air separation unit Author/Source: Coal Chemical Industry 114 Forum Date: April 13, 2020 Clicks: 10 On April 9, Baofeng Energy’s 105,000 cubic meter per day air separation unit was successfully commissioned for the first time. Unit No. 2 of this air separation compressor unit, which is the largest domestically produced compressor unit of its kind designed and manufactured by SHENGU Group, began producing high-quality oxygen and nitrogen products at 9:08 a.m. on that day. At present, the unit is operating smoothly, and all parameters of the oxygen and nitrogen products meet the specified requirements. This is the first time that an air separation unit of this scale has been successfully tested in China and applied in the coal chemical industry. It is understood that the air separation unit is a key equipment for coal-to-olefins projects. Previously, the latter stage of Baofeng Energy’s fund-raised investment project – the project to produce 600,000 tons of olefins per year through coke gasification – namely the project to produce 600,000 tons of olefins per year via methanol production, was officially put into operation in October 2019. The former stage of this project, which involves producing 2.2 million tons of methanol per year through coke gasification, is scheduled to go into operation by June this year. The 2.2 million tons per year methanol project consists of four main components: the air separation unit, the gasification unit, the purification unit, and the methanol synthesis unit. The successful commissioning of the air separation unit lays a solid foundation for the timely operation of the 2.2 million tons per year methanol project. It is estimated that once the 2.2 million tons per year methanol production facility comes online, Baofeng Energy’s methanol production capacity will increase by 130%. Based on the difference of around 700 yuan per ton between the company’s own produced methanol and externally purchased methanol in 2019, this will generate significant economic benefits for the company. In addition, the 600,000 tons per year olefin production facility that was put into operation in the second phase last October will also reach full capacity this year. The output of polyolefins is set to increase by 45% compared to the previous year, and it will account for over 10% of China’s total polyolefin production derived from coal. This will make the company the largest private enterprise in China for producing polyolefins from coal, with capacity and output ranking among the top three among such enterprises in the country. In addition, Baofeng Energy’s Phase 3 olefin project is planned to have an olefin production capacity of 1.8 million tons per year, polyethylene production capacity of 900,000 tons per year, polypropylene production capacity of 900,000 tons per year, methanol production capacity of 6 million tons per year, coke production capacity of 3 million tons per year, and fine chemical product production capacity of 570,000 tons per year; construction is scheduled to begin this year. Baofeng Energy stated that once all phases of the olefin project are completed, the company’s annual production capacity will be as follows: 3 million tons of olefins, 1.5 million tons of polyethylene, 1.5 million tons of polypropylene, 10 million tons of methanol, 7 million tons of coke, and 1.35 million tons of fine chemicals. The company will achieve full coverage of all grades of polyethylene and polypropylene products. By then, its annual methanol production capacity will account for about 10% of the country’s total annual methanol production capacity, while the production capacity of polyolefin-related products will account for around 7% of the country’s total annual production capacity. This will lead to a significant increase in profit margins and resilience against risks. BaoFeng Energy’s financial reports show that in 2019, amid declining prices of products in the polyolefin industry, the company focused on tapping into its internal potential while actively expanding its market presence; by enhancing efficiency to compensate for volume losses and increasing volume to offset price drops, it managed to maintain stable growth in its performance. The company achieved operating revenue of 13.6 billion yuan for the whole year, a 4% increase on a year-on-year basis ； The net profit attributable to the parent company was 3.8 billion yuan, a 3% increase year-on-year ； As of December 31, 2019, the company’s total assets amounted to 33.3 billion yuan, a 24% increase from the beginning of the period ； The owners’ equity attributable to the shareholders of the listed company was 23.4 billion yuan, representing a 71% increase compared to the beginning of the period ； Financial expenses amounted to 324 million, a decrease of 39% year-on-year ； The debt-to-asset ratio dropped to 29.9% ； Net operating cash flow (including bills): 4.5 billion ； . The company’s overall asset quality is continuously improving, profits are stable, cash flow is abundant, and its overall performance is excellent. The driving force behind Baofeng Energy’s growth against the odds comes from the following aspects: First, improved production and operational efficiency – the company enhances its production and operational efficiency through measures such as increasing output, reducing raw material consumption, lowering manufacturing costs, and optimizing the supply and distribution system. Secondly, the project progress is smooth: the project for producing 600,000 tons per year of olefins through coke gasification is advancing steadily ； A 90MWp distributed photovoltaic power generation project has been built, resulting in a significant reduction in electricity costs ； The Phase 3 olefin project is being advanced with full effort. Once again, research and development efforts have made solid progress: significant advancements have been achieved in the development of new products, with new developments in areas such as thin-wall injection molding, chromium-based, metallocene-based, and titanium-based products; some of these products were successfully manufactured at the beginning of this year. At the same time, the company adheres to a high proportion of cash dividends and actively fulfills its social responsibilities in areas such as tax contributions, job creation, carrying out public welfare and charity activities focused on educational poverty alleviation, continuously increasing investment in safety and environmental protection, and contributing to epidemic prevention and control. It is particularly noteworthy that, with the scientific and orderly introduction of new projects, Baofeng Energy will reach new heights in terms of its comprehensive advantages such as industry position, scale of operations, product structure, and financial indicators. This will enable the development of a high-growth model for Baofeng Energy characterized by integration, scale, and high-end differentiation. In terms of capacity expansion and cost reduction, during the first half of 2020, the early-stage project of the fundraising initiative, which involves the production of 2.2 million tons per year of methanol through coke gasification, is expected to come online. This will add 2.2 million tons of methanol production capacity, ensuring that all the methanol needed for polyolefin production can be met domestically once the facility is in operation. Meanwhile, Hongsi Coal Mine will apply for a mining license and begin trial operations in the first half of the year; with its full operation, the coal self-sufficiency rate will further increase. In terms of upgrading the product range and planning future production capacity, in 2020 construction will begin on the first phase of the third-phase project, which involves a coal-to-olefins facility with an annual capacity of 500,000 tons. This project has already received approval from the Autonomous Region’s Development and Reform Commission; construction is expected to start in May. The project includes a methanol production unit with an annual capacity of 1.5 million tons, an ethylene-vinyl acetate copolymer production unit with an annual capacity of 250,000 tons, and a polypropylene production unit with an annual capacity of 300,000 tons. In addition, a 3 million tons per year coking cogeneration project has been launched, which includes 100,000 tons per year of needle coke ； Once in operation, the company’s coking capacity will reach 7 million tons per year, making it one of the largest independent coking enterprises in China in terms of production capacity. Meanwhile, Baofeng Energy plans to build a technology demonstration project that combines 100 MW/year of solar power generation with 20,000 tons/year of hydrogen production via electrolysis; the hydrogen produced will be primarily used in chemical manufacturing, hydrogen storage, and as fuel for vehicles. The company’s scale advantage becomes more evident. By 2020, once the preliminary projects funded by the raised capital – namely the project for producing 2.2 million tons per year of methanol through coke gasification – as well as the Hongsi Coal Mine come online, Baofeng Energy’s expected operating revenue will reach 16.3 billion yuan. At the same time, driven by factors such as an increasing proportion of high-end products, this will **enhance the company’s revenue generation capacity and provide more substantial cash flow. The construction site for the 600,000 tons per year olefin production facility via coke gasification, operated by Ningxia Baofeng Energy Group Co., Ltd., is located in Area A of the Linhe Comprehensive Project Zone within the Ningdong Energy and Chemical Industry Base. The total investment in this project amounts to 1,527,887 million yuan, of which 1,429,736 million yuan is allocated to construction costs. The scale of the project includes a 2.2 million tons per year coke gasification unit for methanol production, a 600,000 tons per year methanol-to-olefins unit, a 300,000 tons per year polyethylene production unit, a 300,000 tons per year polypropylene production unit, as well as various supporting utility systems and auxiliary facilities. There are changes in the construction details of the project at Ningxia Baofeng Energy Group Co., Ltd. for the production of 600,000 tons per year of olefins through coke gasification; the process optimization involves changing the gasification units from 30 fixed-bed gasifiers to 6 fluidized-bed gasifiers ； The air separation unit has been changed from 3 sets of 80,000 Nm3/h to 2 sets of 105,000 Nm3/h; the cryogenic separation unit has been eliminated ； The low-temperature methanol washing unit, refrigeration station unit, sulfur recovery unit, and methanol synthesis and compression unit have all been changed from 2 sets to 1 set ； The power station was changed from 4 boilers of 500 t/h to 3 boilers of 420 t/h.