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Source: Xinhua News Agency. Authors: Chen Zhonghua, Chu Guoqiang, Liu Jun. Affected by rising international prices of crude oil and natural gas, the coal chemical industry, which has long been at a disadvantage in competition with the petrochemical industry, is now facing favorable opportunities. New types of coal chemical processes that produce clean energy and products capable of replacing those derived from petrochemicals have become hot topics for investment in various regions. Many regions and enterprises have made coal chemical industry a key pillar for development, setting goals to build large-scale coal chemical bases. However, recent investigations by journalists in some energy-producing areas have revealed that although the coal chemical industry holds promising prospects, it faces various risks related to technology and the market, as well as many constraints associated with raw materials, water resources, and environmental protection. China’s coal chemical industry should avoid impulsive decisions; instead, it needs to conduct thorough scientific evaluations and make rational plans in order to pursue a new path for this industry characterized by high levels of technological advancement, low resource consumption, minimal environmental pollution, and good economic returns. Coal chemical industry bases with capacities of millions or tens of millions of tons are emerging everywhere. In recent years, various coal-producing regions have formulated development plans for the coal chemical industry, aiming to build large-scale such bases, and a number of key projects have already been launched. In the 11th Five-Year Plans formulated for almost all coal-producing provinces and regions, coal chemical industry has been identified as a key industry to be developed. Many provinces and regions have launched or are planning large-scale coal chemical projects, many of which are on the order of millions or even tens of millions of tons. The following are the coal chemical development plans for some provinces and regions as understood by the reporter: Inner Mongolia aims to develop and produce coal chemical products with high added value, striving to achieve four key development targets, including 5 million tons of coal-to-oil production, 10 million tons of methanol production, 5 million tons of polyvinyl chloride production, and 10 million tons of coal coking production ； Ningxia has proposed to use large-scale projects to drive the strategic development of coal chemical industry; the construction of the Ningdong Energy and Heavy Chemical Industry Base, which has already been launched, involves investment amounts of 30 billion yuan ； Henan Province has proposed to develop the coal chemical industry by focusing on industrial chains such as methanol-olefins, coal coking-tar deep processing, and coal-based synthetic ammonia-fine chemicals, and has aimed to establish five major coal chemical industry bases ； Shaanxi plans to build a coal chemical industry base in northern Shaanxi centered on methanol production. In the near future, the capacity for producing 3 million tons of coal-based oil and 3 million tons of methanol from coal will be established; by 2010, the capacity for coal-based oil production is expected to reach 4 million tons, that for methanol production to reach 6 million tons, and the capacity for producing olefins from methanol to reach 1 million tons ； Guizhou plans to invest over 50 billion yuan in building five major coal chemical bases ； Shanxi, a major coal-producing province, plans to achieve by 2010 a production capacity of 4.5 million tons of methanol, 3 million tons of methanol-derived products, 2.5 million tons of polyvinyl chloride, and 2.55 million tons of coal tar processed products; meanwhile, the production of oil from coal is to be developed on an industrial scale. Many large coal companies have also followed suit, shifting their investment focus to coal chemical industry. Shanxi Coking Coal Group, one of the five major state-owned key coal mining groups in Shanxi Province, plans to build new facilities for the production of 800,000 tons of methanol and 300,000 tons of coal tar ； Datong Coal Mine Group plans to build new projects for 600,000 tons of methanol and 100,000 tons of polyvinyl chloride ； Jincheng Smokeless Coal Mining Group is planning to build a demonstration and industrialization project for 1.3 million tons of coal-based synthetic oil ； Luan Mining Group plans to build a demonstration and industrialization project for 2.76 million tons of coal-based synthetic oil, as well as new projects for 600,000 tons of methanol and 400,000 tons of polyvinyl chloride ； Yangmei Group plans to build new projects for 600,000 tons of methanol and 600,000 tons of dimethyl ether. “During the 11th Five-Year Plan period, large coal enterprises in Shanxi Province alone planned to invest 75.8 billion yuan in developing coal-to-oil technologies, and over 30 billion yuan in coal chemical projects such as methanol and dimethyl ether production. Yankuang Group has invested 10 billion yuan in developing a million-ton coal liquefaction facility in Guizhou, and 9.526 billion yuan in the comprehensive development of coal-to-oil production in Yulin, Shaanxi. The industry has promising prospects, but risks related to technology and the market cannot be ignored. Journalists’ investigations have revealed that although the coal chemical industry currently faces favorable opportunities for development, projects in this field tend to be quite similar across different regions; there is a lack of products and development directions with unique characteristics. Some technologies are still in the experimental stage, posing significant risks, while in some cases there is even duplication of projects, indicating signs of an oversupply. The coal chemical industry will face various risks, including technical and market-related challenges. According to incomplete statistics, the current methanol production capacity under construction in China is at least over 13 million tons, with another 20 million tons planned for construction. Taking into account both the existing and planned projects, the country’s annual methanol production capacity will reach over 50 million tons by 2010. In the past two years, China’s methanol consumption has remained around 4 to 6 million tons. Although some of the projects planned at present may not be implemented in the end, there is clearly a tendency toward overcapacity in the methanol industry, carrying significant investment risks and market risks. Compared to the market risks faced by methanol projects, coal-to-oil projects encounter various risks and constraints in terms of technology, market conditions, and other factors. Experts from the Synthetic Oil Products Engineering Research Center and the Key Laboratory for Coal Conversion point out that the indirect liquefaction of coal to produce synthetic oil has been in industrial production worldwide for many years; this technology is mature in itself. However, due to various factors such as the type of coal, its quality, and reserves, continuous research and development are necessary before entering this industry. Pilot tests must be conducted first, after which it is possible to gradually increase production capacity. Only by reaching an industrial scale of several million tons can satisfactory economic benefits be achieved and investment risks avoided. The investment in coal-to-oil projects is extremely large. The three industrial demonstration plants with a capacity of 160,000 tons each, built in regions such as Shanxi and Inner Mongolia using the indirect liquefaction technology developed by the Shanxi Coal Chemistry Institute, each required an investment of around 2.1 billion yuan. Although larger scale leads to lower per-unit costs, the investment for a project capable of producing 2 million tons of oil from coal still amounts to around 18 billion yuan. “Without mature technologies and a research team committed to continuous innovation, as well as stable investment channels and effective risk mitigation strategies, coal-to-oil projects face significant risks. ”Experts warn. Raw materials, water resources, and environmental protection: all these factors are essential. When establishing coal chemical projects and large-scale coal chemical complexes, it is necessary to take into account not only technical and market factors but also various elements such as energy, water resources, and the environment. Planning should not be carried out blindly or in a haphazard manner. Liu Zuozhou, executive vice president of the Shanxi Provincial Industrial Economy Federation, believes that the development of coal chemical industry requires sufficient coal resources as a foundation; without adequate resources, it is impossible to sustain the growth of this industry. If the national methanol production capacity reaches 50 million tons in 2010, 100 million tons of coal resources will be required ； According to the current plans, the scale of coal-to-oil projects will also exceed 3,000 tons. At a rate of 4 to 5 tons of coal per ton of oil produced, and with a production capacity of 30 million tons, at least 120 million to 150 million tons of coal will be required. According to China’s 11th Five-Year Plan, by 2010 the amount of coal used in the chemical industry across the country was only a little over 100 million tons. Environmental issues will also become a bottleneck restricting the development of the coal chemical industry. Wang Jinglong, an assistant inspector at the Shanxi Provincial Environmental Protection Bureau, analyzed that the coal chemical industry is a sector with high pollution levels and stringent safety requirements. It features long operation cycles as well as numerous and complex production processes, with various pollutants being generated at each stage. Although some of these pollutants can be recovered, those that cannot be recovered are often toxic and harmful, and even slight carelessness can lead to serious environmental safety accidents. Most of these projects are located in major coal-producing areas where environmental capacity is extremely limited. When planning and constructing coal chemical projects, it is essential to fully consider the local environmental capacity, strictly implement environmental impact assessment and the \"three simultaneities\" principle, strengthen regular environmental monitoring, and minimize pollutant emissions. During their interviews, the journalists found that in the planning of some large-scale coal chemical projects and bases, insufficient attention is paid to water supply. The planning for these projects focuses on setting ambitious development goals, yet there are few measures in place to address the existing problems. The water usage plan for a planned million-ton-scale coal-to-oil project actually depends on a Yellow River water diversion project that has not yet begun construction. At the current stage, the preferred regions for developing coal-to-oil production in China are Inner Mongolia, Shaanxi, and Shanxi, but all of these areas face severe water shortages. Indirect coal liquefaction requires 10–12 tons of water to produce 1 ton of oil, while other coal chemical industries consume even more water; for example, producing 1 ton of methanol using traditional processes demands 15 tons of water. New coal chemical industries must play to their “four strengths”. In light of the current boom in planning and construction of large-scale coal chemical projects in certain regions of China, journalists conducted in-depth investigations and, taking into account the suggestions of relevant experts, believe that China should carry out scientific evaluations and rational planning in order to pursue a path for coal chemical development that features high levels of technological advancement, low resource consumption, minimal environmental pollution, and good economic returns. Compared with traditional coal chemical industries, the development of new coal chemical industries relies primarily on clean coal technologies, advanced coal conversion technologies, as well as the integrated application of new technologies for energy conservation, consumption reduction, water saving, and pollution control, in order to address the three key issues of high efficiency, low pollution, and economic viability in the coal conversion process. Experts such as Liu Zuozhou believe that to develop new types of coal chemical industries, it is necessary to play four key cards: the first is the card of resource substitution. To develop new types of coal chemical industries, it is necessary to avoid massive consumption of coal resources and find ways to reduce such consumption. In China’s coal reserves, about half consist of high-sulfur low-quality coal with a sulfur content of over 1%, which cannot be used directly in industrial boilers. Such coal is usually left unmined. Utilizing this high-sulfur low-quality coal to produce methanol would represent a win-win approach for the comprehensive utilization of coal resources, turning waste into value. Furthermore, China’s current annual production of coke oven gas is 80 billion cubic meters; the amount produced in Shanxi Province alone equals the volume of gas generated by the West-East Gas Transmission project. If all of the country’s gas were converted into methanol, 40 million tons could be produced annually, which would prevent resource waste and environmental pollution. Furthermore, our country has abundant coalbed methane reserves of around 300,000 to 35 trillion cubic meters, which is equivalent to natural gas reserves, and this methane can be converted into methanol. Second, it is to leverage technological innovation. Coal chemical processes are characterized by long sequences, complex technologies, numerous stages, high pollution levels, strong system interconnections, and numerous constraints. When developing coal chemical processes, it is necessary to consider the adoption of new technologies that are \"advanced, reliable, suitable, low in pollution, and cost-effective.\" It is important to take into account both the technical challenges and economic costs, as well as whether the resulting products meet the requirements of economic planning. Third, make the most of scale-driven development. New coal chemical industries are technology-intensive and capital-intensive projects; only by reaching a certain scale can they generate good economic benefits. In planning, it is necessary to adhere to the requirements of a high starting point, large scale, and substantial size for coal chemical projects; at the same time, coal, power, and chemical enterprises should be encouraged to cooperate in order to achieve integrated production of coal, electricity, and chemicals. Fourth, make good use of the circular economy strategy. New coal chemical industries should be incorporated into the circular economy framework for coordinated planning, in order to achieve comprehensive development of coal, gas, electricity, and chemicals. To establish an ecological industrial cluster for coal chemical industry, it is necessary to integrate the process technologies of coal chemistry with those of various other industries such as building materials, materials manufacturing, power generation, and waste heat utilization, thereby creating a system for the circular use of resources and energy. This approach helps to minimize consumption and energy use, while reducing environmental pollution and ecological damage. Reasonable planning and scientific development are needed to address the urge for planning. Reports from journalists’ investigations show that local authorities are keen on launching large-scale coal chemical projects, mainly in order to use such projects as a catalyst for the comprehensive development of the coal chemical industry at all its stages – upstream, midstream, and downstream – thereby turning the area into an important coal chemical hub that can boost local economic growth. This development approach of \"large projects – industrial chains – industrial clusters – manufacturing bases\" is understandable, but if the dozens or hundreds of small and medium-sized projects that follow a large project are not planned in advance, taking into account factors such as raw materials, water resources, the regional environment, and market capacity, it will put sustainable development and environmental protection at a disadvantage in the future. Local decision-makers must under no circumstances act impulsively and make hasty decisions due to plans for large-scale projects and substantial investments. In the coal chemical industry, especially for projects with high investment and significant risks such as coal-to-oil and coal-to-olefins production, decisions regarding where to locate these facilities cannot be made arbitrarily. **There must be an overall development strategy, along with guiding industrial policies that provide a comprehensive plan for the industry’s growth.** Research by journalists has shown that although significant breakthroughs have been achieved in the basic research related to coal chemical industry in our country, these still do not fully meet the technical requirements of the development of new types of coal chemical industries ； It is necessary to strengthen the pilot-scale testing phase, as investment in this area is currently largely lacking; coal chemical technology should not be confined to the laboratory setting. Relevant departments should encourage and support original innovation; **funds should be allocated in greater amounts to such fundamental research, so as to provide continuous technical support for the evolving coal chemical industry.