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Modern coal chemical industry seeks a way out despite tough conditions Author/Source: China Petroleum News Center Date: 2020-08-06 Clicks: 16 **Statistics released recently by the Bureau of Statistics show that from January to June, the total profits of industrial enterprises above a certain scale across the country declined by 32.2% in the first half of this year. In particular, the industry involved in the processing of petroleum, coal, and other fuels shifted from being profitable to losing money during the same period. Affected by the sharp drop in international oil prices, the COVID-19 pandemic, and other factors, modern coal chemical industry is one of the sectors most severely impacted; many projects failed to reach their break-even point, resulting in widespread losses within this industry. Although the current situation has eased and production is gradually resuming, the industry as a whole still faces unprecedented difficulties. When will the decline come to an end and stability be restored, allowing for a recovery? Will the impacts caused by external factors persist throughout the 14th Five-Year Plan period? As a new stage of development approaches, how can modern coal chemical industry achieve breakthroughs? Recently, at a conference hosted by the Petroleum and Chemical Industry Planning Institute to discuss the planning guidelines for the petrochemical industry during the 14th Five-Year Plan period, several experts shared their suggestions. The negative impacts of oil prices remaining at low levels will continue. Coal prices and oil prices are the two key factors that affect the profitability of coal chemical projects. Han Hongmei, deputy chief engineer at the Petroleum and Chemical Industry Planning Institute, said that considering the price relationship between energy and chemical products, from 2013 to 2019 rising coal prices and falling product prices squeezed the profit margins of the modern coal chemical industry. Especially in the past six months, under low oil prices, most projects have been operating with great difficulty. As a result, the overall progress of the demonstration project has been slow, and the corresponding technical upgrade tasks have also proven difficult to carry out. Apart from raw material prices, different projects have their own profitable “critical oil price.” For coal-to-oil projects that primarily produce oils and chemicals, the corresponding oil prices are 70–75 dollars per barrel and 55–60 dollars per barrel, respectively; for coal-to-olefins and coal-to-ethylene glycol projects, the corresponding oil prices are 45–50 dollars per barrel and 50–55 dollars per barrel, respectively. After conversion, the critical oil price point for coal-to-natural gas is 2.0 yuan per Nm3. “At present, if oil prices remain at the level of $40–$50 per barrel, only coal-based olefins can maintain a basic balance; it is more difficult for other projects to do so. Even if some companies are profitable, it is possible that this is due to the transfer of profits from coal. ”said Bai Yi, a professor-level senior engineer at the Petroleum and Chemical Industry Planning Institute. Bai Yi analyzed that in the second half of the 13th Five-Year Plan period, international energy prices continued to move toward a state of balance, with oil prices fluctuating around the mid-to-low range of 50–70 dollars per barrel. This will reduce the raw material costs for the petrochemical industry to some extent; if this situation persists for too long, it will also lead to a downturn in the entire chemical industry, with product prices falling as a result, thereby further exacerbating the impact on modern coal chemical industries. “When conducting research on the 14th Five-Year Plan, the factor of low oil prices must be fully taken into account. ” “Long-term low to moderate oil prices will have a profound impact on decisions regarding coal chemical projects. To what extent can modern coal chemical industry withstand oil price shocks and achieve break-even through technological progress and improved management is a focus at present and during the 14th Five-Year Plan period. ”Han Hongmei said. In a sense, the impact of falling international oil prices also underscores the importance of the modern coal chemical industry. “Regardless of how oil prices fluctuate, our country’s status as an oil-poor nation will not change. The more uncertain the international situation, the more it serves as a warning for oil supply. Coal chemical industry is suitable for producing bulk chemicals and petroleum products, and it can effectively compensate for the shortage of oil resources. ”Liu Zhongmin, an academician of the Chinese Academy of Engineering and director of the Dalian Institute of Chemical Physics of the Chinese Academy of Sciences, said. The demonstration projects are progressing slowly, and insufficient attention is being paid to the application side. Behind these industry fluctuations, there are many other issues that deserve attention. Bai Yi said that whereas the 12th Five-Year Plan placed more emphasis on the technologies and processes for using coal chemicals as alternatives to petrochemical products, during the 13th Five-Year Plan period, the industry shifted its focus toward optimization, upgrading, and green development. Over the past 5 years, the coal consumption, overall energy consumption, and industrial water usage in modern coal chemical industries have continued to decline, resulting in improved energy efficiency. Yet at the same time, the progress of the demonstration projects remains slow. “With overall low crude oil prices, along with rising coal prices and stricter environmental regulations, the industry cannot remain in a state of rapid growth forever. ” At the same time, most existing products are researched from a production perspective, with far too little attention paid to the application side. Bai Yi said that in terms of investment, production and operation, as well as technology research and development, there is a pronounced tendency to focus on products rather than applications. When an industry develops to a certain stage and there is a large volume of bulk products, how to better leverage the specificity and characteristics of these products should become a new focus. “When it comes to considering users and tailoring applications accordingly, we are still behind larger foreign companies. ” These limitations further give rise to risks such as homogeneous competition and overcapacity. Han Hongmei gave the example that coal-based ethylene glycol projects have developed rapidly, maintaining an average annual growth rate of 19.5% during the 13th Five-Year Plan period, and have become an effective supplement to petrochemical products. However, while capacity expansion and speed improvements are underway, technical and economic risks still exist. “In the first half of this year, the project startup rate was only 30%-40%; fierce competition from petrochemical ethylene glycol and imported ethylene glycol imposed significant pressure on the industry. ”Han Hongmei admitted that the industrial role of coal-based ethylene glycol remains unclear, and coupled with the investment in new petrochemical ethylene glycol projects along the eastern coast, the market space is continuing to shrink. From the user’s perspective, it is crucial to identify the target market accurately. Several experts also said that technology alone is not enough without production capacity. Even for strategic reserve projects such as coal-to-oil and coal-to-gas, it is necessary to maintain daily production and operations in order to integrate technical reserves with capacity reserves. “From the perspectives of energy infrastructure, energy strategy, and energy security, coal-to-oil and gas is one of the alternative energy production methods that ensure autonomy and control. However, under pressure, some coal-to-oil and gas projects were forced to change their production focus or engage in co-production, which affected their capacity reserve function. ”An industry insider told reporters that at present, coal-to-oil and gas demonstration projects are still planned by enterprises on their own; meeting both **needs and market demands is a prerequisite for securing space for survival and development. Pay attention to the industry’s “value chain” to avoid increased output without corresponding improvements in efficiency. Reporters learned that by the end of last year, China’s modern coal chemical industry had processed 155 million tons of raw coal, accounting for about 5.6% of total coal consumption, indicating that the industry has reached a certain scale of development. Now, under the impact of low oil prices and other factors, how to restructure a value chain that suits the characteristics of the industry has become an important task during the 14th Five-Year Plan period. Bai Yi suggested emphasizing the characteristics of high-end development and adopting a selective development model to avoid a situation where there is growth without an increase in efficiency. From an overall perspective, advance the upgrading of the coal-based clean energy industry to support the efficient development of the **energy system; manage the process of producing coal-derived chemicals in a scientific manner and optimize the construction plans. For the enterprises themselves, it is necessary to actively carry out industrial diagnosis and benchmarking analyses, optimize the allocation of resources and energy utilization strategies, and study the suitability of product grades, performance characteristics, and market development trends. By taking into account regional characteristics and analyzing external factors such as the environment and logistics, it is necessary to avoid an approach that aims for comprehensiveness at all costs or follows a dogmatic development strategy based on the industrial chain concept, instead focusing on the \"value chain\" of the industry. Han Hongmei said that during the 14th Five-Year Plan period, moderate development will be pursued with the goal of enhancing industrial competitiveness. Especially for new projects, it is essential to create high-quality works, while paying attention to proactively adapting to the new trends in industrial development and the new requirements of the market. On this basis, break through key technical bottlenecks, improve system integration and optimization, and further enhance resource utilization and environmental protection levels. In addition to working independently, the experts present also proposed directions for industrial integration and convergence, aiming to develop a new model of integrated production of oil, gas, and electricity centered on modern coal chemical engineering. “The upstream sector is integrated with coal, the midstream sector is linked to industries such as electricity and metallurgy, while the downstream sector is combined with sectors like textiles, agriculture, and building materials, thereby further improving the overall conversion efficiency of coal as well as its cleanliness and efficiency. ” In addition, Han Hongmei suggested that starting from the 14th Five-Year Plan period, coal-based methanol and chemical hydrogen could be included within the scope of modern coal chemical industry. Among these, the promotion of methanol-based vehicles and marine fuels for use in ships opens up very promising market prospects for their application. Hydrogen energy is a key focus of development in China as well as around the world, and one of the foundations for the growth of the hydrogen industry is chemical hydrogen technology. “Alkylhydrogen new energy will bring more opportunities to modern coal chemical industry. ”Han Hongmei gave the example that efforts could be made to develop large-scale methanol energy bases, creating a production structure for coal-to-methanol that is based on such bases, large in scale, requires low investment, and operates at a high level. By focusing on specific projects, the development of the methanol equipment manufacturing industry can be promoted, thereby establishing a comprehensive methanol economy system. At the appropriate time, demonstrations of integrating renewable energy for hydrogen production with the chemical industry could be considered, to help advance the development of \"green, zero-carbon chemistry\".