Coal-to-oil industry enters a freeze period! !
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The last edit to this post was made by jordan569 on 2013-1-6 at 22:39. On September 4, 2008, the **National Development and Reform Commission issued a notice regarding issues related to the management of coal-to-oil projects. The notice stipulated that the only coal-to-oil demonstration projects that could continue to operate at that time were those already under construction, such as the direct coal liquefaction project carried out by Shenhua Group； The Ningxia Ningdong coal indirect liquefaction project, a collaboration between Shenhua Ningxia Coal Industry Group Company and South African Sasol, can only commence after thorough feasibility studies are conducted and the project is approved following the proper procedures. Apart from the projects mentioned above, all other coal-to-oil projects shall be halted. This is the third time since 2006 that the National Development and Reform Commission has halted coal-to-oil projects. The Notice states that coal-to-oil projects are “talent-, technology-, and capital-intensive projects with high investment risks; at present, there are many uncertainties in terms of product orientation, process routes, technical equipment, as well as operation management and economic benefits.” Since the beginning of this year, international crude oil prices have risen sharply, even exceeding $140 per barrel at one point. This seems to ensure that coal-to-oil projects have favorable profit prospects. According to investment return analyses, now is the right time to accelerate the development of such projects, and their market prospects are generally positive. According to authoritative data, by 2020 China’s coal-to-oil industry will have a production capacity of 50 million tons, thanks to 7 projects carried out by companies such as Shenhua Group, Shenhua Ningmei, Yitai Group, Yankuang Group, and Lu’an Group; significant production capacity will be established around 2008. Clearly, although the National Development and Reform Commission’s order to halt operations had already made the once-popular coal-to-oil giants accustomed to such measures, this latest stoppage came as a surprise to them as well. The industry has long been aware of and warned about the various risks and uncertainties associated with coal-to-oil projects as mentioned by the National Development and Reform Commission. The commission has already halted such projects on two occasions for this reason, but these halts have not lasted, as the key players involved are large corporations with considerable influence over policy decisions. From a **macro-control perspective**, although the development of coal chemical industries, including coal-to-oil production, is encouraged, there have always been concerns regarding the risks associated with coal-to-oil production. Policies have also emphasized the need to advance coal liquefaction demonstration projects in an \"ordered manner\" in order to lay the foundation for industrial development over the next decade. In 2008, the industry risks associated with coal-to-oil production did not decrease due to the sharp rise in international crude oil prices. In June 2008, although international crude oil prices surged above $140 per barrel, coal prices also rose sharply, thereby increasing the risks for the coal-to-oil industry. At the beginning of China’s coal-to-oil projects, coal prices were very low. It is around 160 yuan per ton, while the production cost of coal liquefied fuel is approximately 2,000–2,400 yuan per ton. Based on calculations at that time, the break-even point for coal-to-oil conversion is around $40 per barrel of international crude oil. By early July this year, the price of mixed coal from Shanxi in Qinhuangdao had reached around 900 yuan per ton, a 75% increase since the beginning of the year; international coal prices even rose to 200 dollars per ton, an increase of nearly 20 times. According to calculations by professional agencies, when the price of coal at the mine entrance is 300 yuan per ton, the direct/indirect costs of coal-to-oil conversion are 3300 yuan/3500 yuan per ton respectively ； When the price at the coal mine entrance is 500 yuan per ton, the costs per ton for direct/indirect coal-to-oil conversion are 4500 yuan/4800 yuan respectively ； When the price at the coal mine entrance is 1,000 yuan per ton, the cost of direct/indirect coal-to-oil conversion is approximately 10,000 yuan per ton. Further calculations show that if the cost per ton of coal-to-oil production is around 10,000 yuan, the break-even point for this process would correspond to an oil price of 120 dollars per barrel – which is clearly very risky. Although international oil prices exceeded 140 dollars per barrel this year, they have since declined and are currently fluctuating around 100 dollars per barrel. Proponents of coal-to-oil production not only face pressure from coal costs; according to calculations by domestic coal companies, rising steel prices have also caused the investment required for coal-to-oil equipment to nearly double. At the same time, employee costs are also increasing significantly. Even without considering coal costs, the increase in equipment and labor costs accounts for half of the total cost of the project. At present, even without considering pressures such as environmental and ecological issues associated with coal-to-oil projects, cost pressures have become a nightmare for this industry. Moreover, coal-to-oil is not the best approach for China’s future energy substitution and the development of distributed energy sources. In the current industrial environment, perhaps only coal giants like Shenhua Group have the capacity to alleviate cost pressures. Given the current challenges faced simultaneously by industries such as biodiesel, coal chemical engineering, and wind power, any attempt to profit from alternative energy sources is far more complex and difficult than what a business plan would suggest. . Note $ # , $ $
According to calculations by professional agencies, when the price of coal at the mine entrance is 300 yuan per ton, the direct/indirect costs of coal-to-oil conversion are 3300 yuan/3500 yuan per ton respectively； When the price at the coal mine entrance is 500 yuan per ton, the costs per ton for direct/indirect coal-to-oil conversion are 4500 yuan/4800 yuan respectively ； When the price at the coal mine entrance is 1,000 yuan per ton, the cost of direct/indirect coal-to-oil conversion is approximately 10,000 yuan per ton. Further calculations show that if the cost per ton of coal-to-oil production is around 10,000 yuan, the break-even point for this process would correspond to an oil price of 120 dollars per barrel – which is clearly very risky. Although international oil prices exceeded 140 dollars per barrel this year, they have since declined and are currently fluctuating around 100 dollars per barrel. I disagree with this calculation. For the MTG process developed by Mobil, which is a typical indirect coal-to-oil technology, approximately 2.6 tons of methanol are required to produce 1 ton of gasoline (including the LPG produced as a by-product). When the price of coal is 1,000 yuan per ton, the cost of methanol is around 2,700 yuan per ton, while the cost of gasoline is about 8,000 yuan per ton. The break-even point for coal-to-oil production would correspond to an oil price of 78 dollars per barrel ； At a coal price of 600 yuan per ton, the cost of methanol is around 1,700 yuan per ton, while the cost of gasoline is approximately 5,400 yuan per ton. The break-even point for coal-to-oil production would be equivalent to an oil price of 48 dollars per barrel. At the current crude oil price of $40, indirect coal-to-oil production is not profitable.
Everyone has their own opinions. The cost of coal lies in the methods used for extraction, along with labor and transportation costs. In the case of open-pit mines, both extraction and labor costs are relatively low; the highest cost is actually transportation. It is therefore quite economical to build coal chemical processing facilities at the mine sites. We tend to view coal chemistry and petrochemistry as competing fields, as if the development of one means the decline of the other. In reality, at present, coal chemistry serves as an effective complement to petrochemistry. In the field of organic chemistry, petrochemistry clearly cannot meet all the needs, and China began developing coal chemistry quite early on, primarily to address the shortcomings of petrochemistry in terms of fuel gas supply. As industry develops and energy demands increase, petrochemistry also starts to show its limitations in other areas, which makes it necessary to further develop coal chemistry. Of course, other energy sources can also be developed, such as polysilicon for solar energy, nuclear fission, and nuclear fusion. However, solar technology has not seen any breakthroughs yet, and it will take some time before it can be utilized on a commercial scale. As for nuclear energy, it can only provide electricity and steam, without generating tangible materials. Therefore, coal chemistry will continue to develop, no matter what the costs may be.
When was the original poster’s message posted? Is there a connection with what is stated in the **Top 10 Industry Plans?
This news was released in October 2008, at the beginning of the financial crisis, and it has now affected the real economy! So from any perspective, current coal-to-oil projects are in a freeze period. But I hope the freeze period won’t be too long, and that it will end soon! !
The reason why it seems that coal-to-oil projects are everywhere in our country is mainly because many companies do not actually intend to build coal chemical plants; instead, they use this as an opportunity to seize coal resources. In fact, coal-to-oil production comes with high entry barriers: financial barriers, as the investment required for large-scale projects amounts to tens of billions ； Technical barriers: In China, only companies such as Yankuang, the Shanxi Institute of Coal Chemistry under the Chinese Academy of Sciences, and the Beijing Research Institute of Coal Chemical Technology belong to those that have been actively involved in the research and development of coal-to-oil technologies for a long time. At present, China possesses the technical and economic conditions necessary to develop coal-to-oil technology. On the one hand, Yankuang, the Shanxi Coal Chemistry Institute of the Chinese Academy of Sciences, and Shenhua Group have all carried out pilot tests on different scales ； On the other hand, the continuous rise in international oil prices has made it economically feasible to develop coal-to-oil technology. Currently, companies such as Shenhua, Yankuang, Yitai, and Lu’an have launched coal-to-oil projects of varying scales. The development of coal-to-oil production requires **policy support**; the healthy development of this industry in China also needs **such policy support**. For example: a risk reserve will be established. When oil prices are high, companies are allowed to set aside profits in accounts for pre-tax deduction; when oil prices are low, risk reserves are used to provide subsidies. The Ministry of Finance and other agencies are also studying South Africa’s floor price policy, under which oil is purchased at a fixed price to serve as strategic reserves once oil prices drop to a certain level. This post was last edited by Ma Hai on 2009-3-7 08:40.]
I heard that South Africa’s Sasol is still able to turn a profit at an oil price of $35 per barrel; I wonder how they manage to do that.
Which professional organization has calculated such costs? . If you don’t understand coal-to-oil conversion, you’ll conduct tests randomly.
One aspect is that the cost of Sasol coal is very low! On the other hand, its technology has reached maturity! Production is stable!
Sasol has a wide range of products; oil is just one of them. The company also produces many high-value chemicals, waxes, and chemical raw materials, and even when oil prices are low, these products still enable Sasol to generate significant profits. Currently, many people use rather unreasonable methods to calculate the costs of indirect coal liquefaction; they simply consider how much oil can be produced per ton of coal and how much water is consumed, without taking into account many other products with high added value. These products are often more valuable than oil and should not be overlooked.
I agree with what was said above; although the main products of coal-to-oil conversion are naphtha and diesel, there are also many by-products. This post was last edited by Zhenzhen Youci on 2009-3-16 19:49.]
In late February 2009, officials from Shenhua Group revealed in Beijing that the group’s coal direct liquefaction project in Ordos was scheduled to begin its second trial operation in June of that year, with commercial operation potentially starting in 2010.
The debate over coal-to-oil conversion has never ceased, and companies’ interest in this technology has not diminished at all. Setting aside the issue of costs, it is also a consideration to secure a position in the energy sector; since coal-to-oil production is no longer profitable, other areas of coal chemical processing can be explored.
I hope China’s economy improves rapidly! I also hope Shenhua can pull through! ! I hope the industry can recover!
According to calculations by professional agencies, when the price of coal at the mine entrance is 300 yuan per ton, the direct/indirect costs of coal-to-oil conversion are 3300 yuan/3500 yuan per ton respectively； When the price at the coal mine entrance is 500 yuan per ton, the costs per ton for direct/indirect coal-to-oil conversion are 4500 yuan/4800 yuan respectively ； When the price at the coal mine entrance is 1,000 yuan per ton, the cost of direct/indirect coal-to-oil conversion is approximately 10,000 yuan per ton. Further calculations show that if the cost per ton of coal-to-oil production is around 10,000 yuan, the break-even point for this process would correspond to an oil price of 120 dollars per barrel – which is clearly very risky. Although international oil prices exceeded 140 dollars per barrel this year, they have since declined and are currently fluctuating around 100 dollars per barrel. Such a high opening price? What coal? The selling price of thermal coal is just that much, it’s ridiculous. Are they trying to turn bituminous coal into oil?
The products obtained from indirect coal-to-oil conversion are some straight-chain alkanes, which, after separation, cannot be used as gasoline nor as diesel. When the production volume is low, it can be turned into solvents, waxes, components for diesel blending, or degraded via dehydrogenation to produce alpha-olefins as chemical raw materials ； When production volume is too high, market capacity is limited. If we insist on making it into gasoline or diesel, the costs will rise even further. Lignite, the raw material used for direct coal liquefaction, is inexpensive, and the yield of liquefied oil is relatively high. However, the properties of this liquefied oil are similar to those of medium- and low-temperature coal tar; it is far inferior in quality to low-grade crude oil (petroleum), with lower hydrogen content, higher oxygen content, and greater density. Further processing requires significant costs, and the process is complex and lengthy – essentially similar to that in oil refineries, but on a smaller scale, making it difficult to achieve economies of scale. In short, those engaged in indirect coal-to-oil research should just focus on producing results and making money through technology transfers, without caring about downstream processing. The companies involved in these projects are all major coal companies; they have no knowledge of oil refining or the chemical industry, so even if they suffer losses, it’s still **’s problem. For direct coal-to-oil conversion, only a small amount of coal liquefied oil has been produced so far; it is still too early to obtain qualified gasoline and diesel. It will take many years before scale benefits can be achieved, so we just need to wait patiently.
Don’t they know SASOL upstairs? I wonder how Germany managed to convert coal into oil during World War II? It seems better to learn more about the background before making comments.
I believe that coal-to-oil conversion is a reluctant measure to use coal, which is a primary energy source, as a substitute for oil, which is also a primary energy source. As part of an energy strategy, a pilot company can be designated for research and development; large-scale approvals should not be given from the very beginning. Many companies are taking advantage of this situation to acquire coal, and only when things take an unfavorable turn are restrictions introduced. I think this is a mistake in policy-making.
Mr. Solarzhao: Do you really understand Sasol? How much is invested in R&D? How many years will it take before I start making money? Is it **behavior?