Energy giants busy expanding their presence in the coal chemical industry

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Energy giants are busy expanding their presence in the coal chemical industry. Following the announcement by Shaanxi Yanchang Petroleum Group Company that its subsidiary, Shaanxi Xinghua Group, has completed the preparations for a project to produce 300,000 tons of synthetic ammonia per year as well as 300,000 tons of methanol per year from coal; construction is set to begin around the Spring Festival, all four domestic oil companies that have the rights to explore, extract, and operate oil and gas have now entered the coal chemical sector as well. With the support of power and coal companies, energy giants are vigorously expanding their presence in the coal chemical industry. "Oil and gas resources in China and around the world are becoming increasingly depleted, and their extraction is becoming more difficult. In contrast, coal resources are relatively abundant; only by developing coal-based chemical industries simultaneously with petrochemical industries can oil companies ensure a secure future for themselves. "Speaking of the reasons why oil companies are entering the coal chemical industry, the head of Shaanxi Yanchang Group said this. Sinopec was one of the first large oil and gas companies to enter the coal chemical industry. Since 2000, the company has invested heavily in transforming its four fertilizer production facilities by replacing oil with coal. Now, they have clearly stated that they intend to shift part of their focus to the coal chemical industry, hoping to make a significant impact in this relatively unfamiliar field. Sinopec’s strategy for the coal chemical industry is \"integration of upstream and downstream operations.\" To this end, in addition to continuing to strengthen its cooperation with domestic coal companies, it is also accelerating its efforts to establish its own operations in this field. In the future, it plans to invest over 50 billion yuan in Xinjiang to develop coal mining and coal chemical projects. Last August, CNPC signed a letter of intent for cooperation with Inner Mongolia Energy Co., Ltd. to jointly launch coal chemical projects in Inner Mongolia, becoming the second oil company to enter this sector. One month later, CNOOC established CNOOC Chemical Jincheng Joint Venture in Jincheng, Shanxi, with a joint investment of 4 billion yuan to build the country’s largest single-unit ammonia synthesis plant with an annual capacity of 600,000 tons, as well as a urea production facility with an annual capacity of 1.04 million tons ； Last October, a large-scale coal chemical project in Tumote Right Banner, Baotou City, Inner Mongolia, funded by CNOOC’s China Panhai Holdings with a total investment of 22.8 billion yuan, began construction; the capacity of its first phase alone is 1.8 million tons per year of methanol. Oil giants have all entered the coal chemical industry, and power giants are not far behind. In March 2006, the Methyl Methanol Propylene (MTP) project in Dolun County, Inner Mongolia, for which Datang International Power Generation Co., Ltd. invested 16.2 billion yuan, began construction, marking the first step taken by a power company into the coal chemical industry. Since then, the five major state-owned power groups have accelerated their entry into the coal chemical industry one after another. Last September, China Huaneng Group Xinjiang Energy Development Co., Ltd. was established, with one of its goals being to accelerate the progress of coal chemical projects in the eastern Junggar region. Subsequently, Huaneng Group launched several large-scale coal chemical projects in Jilin and Ningxia, in collaboration with local governments and relevant enterprises there ； Last November, China Power Investment Corporation signed an agreement with the Ningxia Autonomous Region, planning to invest hundreds of millions of yuan between 2008 and 2015 in projects such as coal chemical manufacturing at the Ningdong Energy and Chemical Industry Base. In December, it established an energy development company in the Daxinganling region, entering the local coal chemical industry as well ； At the end of last year, the State Power Investment Corporation’s project for producing 300,000 tons per year of synthetic ammonia and 520,000 tons per year of urea from coal in Chifeng City, Inner Mongolia, began operations. Including the coal chemical projects that Huadian Group had previously built in Yunnan, Guizhou, and Ningxia, by the end of last year, all five major state-owned power companies had formed partnerships with the coal chemical industry. Compared to the actions of petroleum and electricity, which are \"distant relatives\" of coal, the coal giants, being close relatives of coal chemical industry, have taken even more ambitious steps. In August 2004, the Shenhua Group’s coal-to-oil project in Ordos, Inner Mongolia, with an annual capacity of 5 million tons, began construction, marking the entry of this coal giant into the coal chemical industry; it is also the largest coal-to-oil project in China. Subsequently, coal companies such as Yankuang, Lu’an, and Yitai also launched indirect coal-to-oil projects in Shanxi, Inner Mongolia, Ningxia, and Shaanxi. Large coal companies such as Jinmei, Lanhua, Yongmei, Heemei, Pingmei, Datong, and Wanbei Coal and Electricity have all pursued further development in the field of coal chemicals through reorganization, shareholding, taking control stakes, or making direct investments to build factories. Shaanxi Coal Industry Group, the largest coal enterprise in Shaanxi Province, has now brought under its control companies such as Shaanxi Weihua Group, Shaanxi Chemical Industry Group, and Shaanxi Coking Company, thereby forming Shaanxi Coal and Chemical Industry Group Company. With the commissioning of various projects under its umbrella, including a coal coking facility with an annual capacity of 700,000 tons and a dimethyl ether production plant with an annual capacity of 1 million tons, by 2010 Shaanxi Coal and Chemical Industry Group’s annual production volume was expected to exceed 5 million tons, while its annual sales revenue was set to surpass 50 billion yuan, making it a leading player in China’s coal chemical industry. A CEO from a coal company did some calculations for the journalists: the price of one ton of coal is less than 300 yuan, while the price of one ton of methanol is over 3,000 yuan. Even if we assume that it takes 1.5 tons of raw coal and 1 ton of fuel coal to produce one ton of methanol, the value of one ton of coal increases by more than 900 yuan after it is converted into methanol. If the industrial chain is extended further, the added value will be even greater. "“Since it’s profitable, why do we only dig and sell coal, rather than producing coal-based chemical products?” he asked with a smile.