Dawn breaks for the coal-to-gas industry

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A New Dawn for the Coal-to-Gas Industry Author/Source: Modern Coal Chemicals Date: May 20, 2022 Clicks: 18 The industry believes that, from the perspective of ensuring **energy security, it is necessary to develop demonstration projects for coal-to-gas conversion, so as to have the capability to switch from transporting coal to transporting gas in times of need. However, one should not pursue development blindly just because the situation improves; it is recommended to focus on setting examples and adopting a moderate approach to planning. Recently, good news came from the long-stagnant coal-to-natural gas industry. According to the latest figures released by Inner Mongolia Datang International Kesikteng Coal-to-Natural Gas Co., Ltd. (hereinafter referred to as “Datang Kesikteng Company”), in the first quarter the company’s losses were reduced by 77.32% on a year-on-year basis; it posted a profit of 14.1 million yuan in March, and this positive start to the year laid the foundation for achieving a turnaround in profits for the whole year. Ren Yanjie, deputy general manager of Xinjiang Qinghua Energy Group, told reporters that building on the achievement of turning losses into profits for the first time last year, the group produced approximately 400 million cubic meters of natural gas in the first quarter of this year, continuing this positive trend. “In the first quarter, the operation rate of coal-to-natural gas plants was high, and the industry as a whole achieved profitability, which is a significant improvement. ”Wang Xiujiang, deputy secretary-general of the Coal Chemicals Committee of the China Petroleum and Chemical Industry Federation, also confirmed this to reporters. Coal-to-gas is positioned as a \"**strategic energy technology and capacity reserve**, playing a vital role in ensuring energy security. At the same time, it is an undeniable fact that the entire industry has been operating at a loss for years; since its inception, cost efficiency has remained the primary challenge that has yet to be resolved. Today, is this strong recovery a fleeting phenomenon or the dawn of a new era for the industry? The recovery of this sector is thanks to various positive factors; turning losses into profits is first and foremost attributed to objective advantages. “All the coal-to-gas projects in operation in our country are operating safely and stably, with technology and equipment levels that are among the best in the world. One of the main reasons for long-term losses is being under pressure from high coal prices and low gas prices on both ends, resulting in costs exceeding sales prices for an extended period. Except for one project whose product is liquefied natural gas and is priced according to market rates, the other projects have long lacked a say in terms of sales and pricing. ”Wang Xiujiang said that the establishment of the pipeline network company has opened up gas transmission channels and created a more fair business environment, which has led to an increase in the price at which coal-based gas is integrated into the network. Taking Inner Mongolia, where such projects are concentrated, as an example, the reporter learned from the Autonomous Region’s Development and Reform Commission that last December, due to the cold weather, there was a high demand for natural gas for heating; the average trading price of coal-derived gas in the region was 4,890.67 yuan per ton. Based on past experience, as temperatures rise, demand for gas decreases starting in February, leading to a seasonal drop in prices. However, in February of this year, the average trading price of coal-based gas in the entire region was 5,292.83 yuan per ton, representing a 21.23% increase compared to January, and a 63.08% increase compared to the same period last year. “ **After the pipeline company was established, gas transportation was carried out following an ‘X+1+X’ model: the sales side would find its own customers, while the pipeline company was responsible only for the transportation task. This has activated the natural gas market, and the increased degree of marketization has led to higher prices for coal-based gas. ”Ren Yanjie explained. The recovery of the industry also depends on its own efforts. As the first **-grade coal-to-gas demonstration project, Datang Keqi Coal-to-Gas is also the largest single-investment project in Fuxin’s history. Despite being in operation for over 10 years, it has yet to turn a profit. At present, revitalizing this project has been ranked as the top priority among the “three major campaigns” for advancing the construction of projects in Fuxin, and the local authorities are **actively working to resolve issues such as coal supply and market conditions. According to people familiar with the situation, Datang Group is also helping itself to become more streamlined by shedding its debts. The project plan calls for phased upgrades: first, upgrading the existing facilities to produce liquefied natural gas, BDO (1,4-butanediol), and by-products; second, using BDO as a raw material to continue manufacturing biodegradable plastics and high-value-added new materials. It stimulates the drive for corporate business expansion; continuous losses once hindered the development of the entire industry, causing some approved projects to slow down their progress, and some projects were even forced to come to a halt. As the situation improves, many companies have regained their momentum. The reporter learned that the 700,000 cubic meters per day coal-to-natural gas liquefaction project of Datang Keqi Company began construction in late April. The investment planned for this project is 179.4828 million yuan; the construction scope includes natural gas purification and liquefaction systems, storage facilities, loading and unloading systems, auxiliary production systems, as well as utility systems, with a designed annual output of 1.33 billion cubic meters of natural gas. Ren Yanjie explained that Xinjiang Qinghua has proactively responded to the key technological innovation tasks related to the clean and efficient use of coal set by **, and is developing a 4.0MPa pressurized fluidized bed gasifier for the comprehensive utilization of slurry coal (referred to as the “Qinghua gasifier”). This gasifier is capable of processing 2,400 tons of coal per day, producing 327 million cubic meters of natural gas annually. In addition to reducing production costs, the Qinghua furnace features a high methane content in the output gas, generates plenty of by-product steam, produces less gasification wastewater that is easy to treat, thus meeting the requirements for energy conservation and emission reduction. “We aim to complete the industrial application demonstration of the first Qinghua furnace within 2 years; by then, Qinghua will become a demonstration base that leads the coal-to-gas industry in terms of technology, has the highest level of domestic production, and achieves the most conversions of innovative achievements. ”Ren Yanjie said that Qinghua continues to improve its existing process chain, promotes the localization of methanation catalysts, water treatment membranes, and other products, and proactively provides a platform for new technologies. “The localization and diversification of the production chain will help minimize the impact of international conditions on coal-to-gas projects, thereby enhancing **energy security. ” According to the aforementioned sources, the 4 billion cubic meters per year coal-to-natural gas project of Inner Mongolia Huaxing New Energy Co., Ltd., which received approval for its environmental impact assessment in 2019 and submitted an application for approval in 2020, has recently been approved by the **National Development and Reform Commission. The company is one of the first private enterprises to enter the coal-to-gas industry and the field of investment in gas pipeline construction; it plans to invest 24.4 billion yuan to create a demonstration project for the deep processing of coal with coal-to-gas as its core. “According to the environmental impact assessment plan, the project intends to use local coal as raw material, with natural gas amounting to 4 billion cubic meters per year as the main product; the by-products include, among others, 240,000 tons of tar per year. ” Rationally consider uncertainties; while seizing opportunities, businesses must also maintain rational thinking. Ren Yanjie admitted that although gas prices are rising at present, there are many uncertainties behind this trend. Moreover, since the production cost of gas produced from coal is higher than that of conventional natural gas, such projects may not be able to maintain stable profits. As a manufacturing project with a high degree of industrial concentration, coal-to-gas production is constrained by the principle of determining output based on coal availability. When there is a shortage of coal, it leads to frequent fluctuations in the production capacity of the facilities and unstable supply of natural gas, which can easily result in a loss of trust among downstream users. “This issue arose in the first phase of the Qinghua project: the supporting coal mines were unable to supply enough coal, and operating at low capacity made it impossible to achieve an economically viable production model, thereby increasing operational costs and risks. Furthermore, due to poor economic returns in the early stages, coal-to-gas projects have a long cost recovery period. Companies face limited financing options, small scale of operations, and high costs, which discourages investment institutions from getting involved, thereby increasing the difficulty of financing such projects. ” “Even if conditions improve, companies should approach launching new projects cautiously and be prepared to address market challenges. ”Wang Xiujiang also raised the issue of \"uncertainty\". He believes that coal-to-gas products are highly substitutable. For example, electricity can be used as a substitute in civilian applications such as cooking and heating. Another example is the chemical industry, where products such as synthetic ammonia and methanol can be manufactured using coal as a raw material. “The technologies and facilities for producing methanol from coal and synthetic ammonia from coal are already well-developed, and using coal directly allows for avoiding unnecessary steps, resulting in higher energy efficiency. From the perspective of ensuring **energy security, we need to establish a demonstration pathway for coal-to-gas conversion, so as to have the capability to switch from transporting coal to transporting gas in times of need. However, one should not pursue development blindly just because the situation improves; it is recommended to focus on setting examples and adopting a moderate approach to layout. ” Several other people have warned of the need to pay attention to the challenges posed by carbon emissions. “At present, the comprehensive energy consumption and water consumption per unit of output for China’s coal-to-gas demonstration projects are close to or better than the **set control targets; the energy conversion efficiency is superior to that of other coal chemical processes. However, high carbon emissions during the production process are inevitable. On the one hand, it is necessary to reduce carbon emissions at the source; on the other hand, the carbon dioxide generated in coal-to-gas processes has a high concentration and is easy to capture, so finding ways for its sequestration and comprehensive utilization also represents a challenge.