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The “2008 China International Coal Conference,” co-hosted by the China Coal Industry Association and the British Coal Conference Company, was held in Beijing on April 14. Chen Liming, Executive Vice President of Sasol China,’s speech on “The Development of Coal-to-Oil Projects in China” became a topic of focus. Among the many attendees, Ling Wen, President of Shenhua Energy Co., Ltd., and Ren Runhou, Chairman of Shanxi Lu’an Group Company, were the most interested in Chen Liming’s speech… Shenhua’s coal-to-oil project, which has taken 4 years to develop and involved an investment of over 10 billion yuan, is set to go into operation in September this year ； Similarly, the coal-to-oil project in which Lu’an has invested over 10 billion yuan will also come online in August this year. In fact, amid the sharp rise in international crude oil prices, more coal companies in China have joined the trend of converting coal into oil. Behind a company’s pursuit of profits, it is worth questioning whether replacing one scarce resource with another is the absolute trend in the development of new energy sources Luan coal-to-oil plant has an annual production capacity of 150,000 tons. It came online in August this year, with an annual output of 150,000 tons. ”When talking about the progress of the coal-to-oil project at Shanxi Lu’an Coal Industry (Group) Co., Ltd., Wang Dongfei, the director of the company’s technology center, is very familiar with all the details. Wang Dongfei told reporters that the Lu’an coal-based synthetic oil demonstration project is a continuation of the **\"863\" high-tech program and the major projects under the Chinese Academy of Sciences’ Knowledge Innovation Program; it is a coal synthetic oil demonstration project selected through bidding for such high-level projects. Centered on the \"Industrialized Slurry Bed Technology for the Synthesis of Coal-Based Liquid Fuels,\" which was independently developed by the Shanxi Coal Chemistry Institute of the Chinese Academy of Sciences, and featuring complete independent intellectual property rights, the project will become China’s first industrial production line for coal-based synthetic oil technology upon completion. The Tunliu Coal-Oil Circular Economy Park of Lu’an Group is located in Changzhi City, Shanxi Province. It includes a coal-based synthetic oil production plant with an annual capacity of 2.6 million tons as its core, along with supporting facilities such as coal mines, coal washing plants, fertilizer factories, oil processing plants, tar processing plants, and wastewater treatment and recycling plants. The total investment in this project amounts to over 24.2 billion yuan; the full cost per ton of oil is 2,522 yuan, which is equivalent to approximately 27 US dollars per barrel at international crude oil prices. Once completed, the park will be able to produce over 100 types of energy chemical products to meet market demands. The coal-to-oil project is designed to produce 160,000 tons per year of oil-equivalent products. The diesel produced can be used in existing vehicles, saving 30%–40% compared to conventional vehicle fuels, with exhaust emissions meeting the Euro V standards. It can be used directly as aviation fuel and marine fuel, and as an additive in regular diesel to improve its quality. Shenhua to invest 240 billion yuan in coal-to-oil projects. China Shenhua (601088), which ranks first among the top 100 coal companies, is also the most powerful in terms of coal-to-oil projects. “The coal-to-oil project of Shenhua Ordos (600295 stock details, stock forum) has an initial annual production capacity of 1 million tons, with the capacity rising to 3 million tons once it is completed. In fact, before implementing the industrial production of direct coal liquefaction technology, Shenhua Group had established a small-scale industrial experimental facility for direct coal liquefaction in Shanghai, which was successful. It is now time to scale up the experimental technology by 1,000 times for industrial production; 99% of the total work has been completed by the end of 2007, and large-scale production is set to begin in September this year. ”Another relevant official from Shenhua Energy Co., Ltd. told reporters at the site of the China International Coal Conference. It is reported that Shenhua Group’s first large-scale project for direct coal liquefaction into oil is undertaken by China Shenhua Coal-to-Oil Co., Ltd., a wholly-owned subsidiary of Shenhua Group, either directly or indirectly. The company is located in Majiata, Ordos City, Inner Mongolia Autonomous Region, with a registered capital of 2 billion RMB. Its main business involves projects for the direct liquefaction of coal; it is a large petrochemical company focused on energy conversion through the extraction of oil from coal, and it receives financial support. In 1998, the State Council allocated approximately 11 billion RMB in funds designated for coal-based oil production to Shenhua Group. In 2004, Shenhua invested 10 billion yuan in the direct liquefaction project. The total capacity of this project was designed to be 5 million tons of oil products per year, with construction taking place in two phases. Phase one consisted of 3 production lines, with an annual output of 3.2 million tons of oil products. The first production line, also known as the direct coal liquefaction demonstration project, is currently under intensive construction. Once completed and put into operation, it will consume 3.45 million tons of coal per year and be able to produce 1.08 million tons of various oil products. It is expected that by 2020, it will account for 20% of the market share in replacing imported oil ； The long-term plan for this project is to invest 240 billion yuan to establish a production facility with an annual output of 30 million tons of refined oil by 2020. Coal-to-oil production sees a 12-fold increase** While Shenhua and Lu’an Group’s coal-to-oil projects are progressing in an orderly manner, various coal companies such as Yankuang Group and Inner Mongolia Yitai Group have also raised the banner of entering the coal-to-oil sector, announcing their plans to launch such projects on a large scale. An expert from the China Coal Industry Association explained that in January last year, the \"Application Report for the Yankuang Yulin 1 million tons per year coal indirect liquefaction oil production industrial demonstration project\" was approved following evaluations by officials from the National Development and Reform Commission, the Energy Administration, as well as experts and scholars ； The coal indirect liquefaction oil production project, built in the Dalu New Area of Zhungeer Banner in Inner Mongolia with an investment of over 2.5 billion yuan by Inner Mongolia Yitai Group Co., Ltd., is progressing smoothly; the first production line is expected to begin trial operations in September 2008. Leveraging the technology of the Shanxi Coal Chemistry Institute under the Chinese Academy of Sciences, this project is planned to produce 480,000 tons of synthetic fuels per year. The first production line is designed to have an annual capacity of 160,000 tons; once operational, it will mainly produce products such as diesel, liquefied petroleum gas, and naphtha, with high-quality diesel accounting for around 60% to 80% of the output. Coal-to-oil projects are emerging across the country in large numbers; in the view of Chen Liming, executive vice president of Sasol China, this represents a 12-fold increase in value. Chen Liming said that coal liquefaction technology refers to the technique of using coal as a raw material to produce gasoline, diesel, and liquefied petroleum gas. As early as the 1920s, Germany built the world’s first plant for the direct liquefaction of coal. To overcome the difficulties associated with importing oil, South Africa has spent $7 billion since the 1950s to build three coal liquefaction plants, which produce over 7 million tons of petroleum products per year. From the perspective of value addition in coal processing, coal-based power generation can increase the value by 2 times, coal-to-methanol conversion can boost the value by about 4 times, while coal-to-oil conversion can increase the value by 8 to 12 times; this encourages enterprises to be highly motivated to extend the industrial chain and develop the coal chemical industry ； Secondly, by 2020, China’s oil consumption will exceed 4.5 billion tons, and 60% of its oil demand will need to be met through imports. About four tons of coal are required to produce one ton of oil. Based on the international price ratio between coal and oil, as long as the international oil price remains above $23 per barrel, coal-to-oil conversion holds great prospects. Currently, the price of international crude oil futures exceeds $100 per barrel, so the profits involved are obvious. Blueprints for the Seven Major Coal Chemical Industry Zones In fact, the rapid expansion of China’s coal-to-oil industry is closely related to the \"Draft Medium- and Long-Term Development Plan for the Coal Chemical Industry.\" The draft plan for the medium- and long-term development of the coal chemical industry states that from 2006 to 2020, China will invest over 1 trillion yuan in this sector, of which 50% will be spent on equipment and 10% on technology. The draft proposes that by 2010, 2015, and 2020, the annual production capacity for coal-to-oil conversion should be 1.5 million tons, 10 million tons, and 30 million tons respectively (in 2015 and 2020, coal-to-oil products will account for 4% and 10% of total refined oil production) ； The plan for blending dimethyl ether into gasoline is to achieve annual production volumes of 5 million tons, 12 million tons, and 20 million tons at the aforementioned three time points. China plans to establish seven major coal chemical industry zones across the country, namely in the middle and lower reaches of the Yellow River, Eastern Mongolia, Eastern Heilongjiang, Jiangsu, Shandong, Henan, Anhui, the Central Plains, Yunnan, Guizhou, and Xinjiang. According to the initial plan, large-scale production bases for methanol, dimethyl ether, and coal-to-oil products will be established in the middle and lower reaches of the Yellow River, Xinjiang, and eastern Mongolia. The Medium- and Long-Term Development Plan for the Coal Chemical Industry is currently under revision and will be released in 2008. “At this rate of development, by 2020 China will have invested between 400 billion and 500 billion yuan in coal-to-oil projects, resulting in an annual production capacity of 50 million tons of coal-to-oil products. ”An expert from the China Coal Industry Association said. Related reports: Coal-to-oil faces environmental pressures and efficiency challenges. Debates also exist regarding this endeavor that involves significant capital and technical resources. The focus of the debate lies mainly on environmental pressures, energy efficiency, and technology. Zhong Weijun, a senior economist at Anhui Huaibei Mining Group Company, said that coal-to-oil conversion involves using coal as a raw material and undergoing chemical reactions to produce oil. Coal-to-oil production places high demands on coal resources, water resources, the ecosystem, the environment, technology, funding, and various social infrastructures. It involves risks in terms of technology, economics, the environment, and society, with these risks taking different forms at various stages. For example, coal-to-oil projects require huge investments, with relatively high initial costs ； Our demonstration project still needs to be scaled up on an industrial scale ； Oil prices could fall, and so on. However, I believe that as the world’s second-largest oil consumer and third-largest oil importer, a coal-to-oil chemical industry based on coal gasification is a practical option for China’s energy strategy. Han Yizhuo, a researcher at the Shanxi Coal Chemistry Institute of the Chinese Academy of Sciences, said that the primary challenge in coal-to-oil conversion is related to location; many coal-rich areas in China are far away from economically developed regions. In China, areas with abundant coal lack water, while areas with plenty of water lack coal. Therefore, the planning and layout for the development of coal chemical industry must be reasonable; abundant coal resources, sufficient water supply, and convenient transportation are all essential conditions that cannot be lacking. According to the data, a coal-to-oil project with an output of 1 million tons per year requires an investment of 10 billion yuan, and it consumes 5 million tons of coal and 10 million tons of water per year. To develop the coal chemical industry, there must first be an adequate supply of coal resources as a foundation. China has a large total amount of coal resources, but the reserves that are at a sufficient depth for exploitation are limited. Compared with other major coal-producing countries, the effective supply is insufficient and the utilization efficiency is low. Therefore, it is necessary to intensify geological exploration in order to further increase the economically viable coal resources and improve energy utilization efficiency. Therefore, it is necessary to develop a comprehensive plan to guide development. **It is necessary to actively develop a comprehensive plan for the coal-to-oil industry, gradually expanding it on the basis of pilot projects in order to avoid investment risks. It is essential to take into account all aspects such as the resources, ecology, and environment of the production sites, and to formulate a medium- to long-term development plan that ensures coordinated planning, rational layout, scientific guidance, and orderly development. The reporter learned that there is another argument regarding coal-to-oil conversion: the production process of coal-to-oil generates large amounts of carbon dioxide, with 7 to 8 tons of carbon dioxide being emitted for every ton of oil produced. Therefore, our country also adopts an attitude of \"active support and cautious advancement\" toward coal-to-oil projects. Furthermore, although China has substantial total coal reserves, its per capita coal allocation is only 60% of the world average. Coal is also a non-renewable resource; replacing one scarce resource with another is not an absolute trend in the development of new energy sources. (Reporter Long Jinguang reports from Beijing)