Gasification outsourcing News

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Outsourcing coal gasification – would you like to give it a try? Author: Zhang Xinggang Source: China Chemical Industry News Clicks: 23 Update date: 2011-12-05 Gasification is the key process in coal chemical projects. The image shows a gasification unit of a company. 　　According to reports from Sinochem New Network, journalists have found in recent interviews that many domestic coal chemical projects do not intend to build the gasification units themselves; instead, they plan to have third parties invest in, construct, and operate these units, with those third parties being responsible for supplying the gases required by the coal chemical processes. The outsourcing providers are mostly giants in the domestic and international industrial gas industry. For example: On September 24, 2010, the Yantai Development Zone signed an investment agreement for clean coal gasification with Air Products and Chemicals Inc. 　　On December 3, 2010, Karamay City in Xinjiang signed an agreement with Yingde Gas Group, a major domestic industrial gas company, to build a coal-to-syngas project in the petrochemical industrial park. 　　On December 18, 2010, a contract was signed for a clean coal gasification project to be built in cooperation between the Management Committee of the Liaobin Coastal Economic Zone in Panjin, Liaoning, and Air Products and Chemicals Inc. 　　In early 2011, Air Liquide of France signed a contract to invest $300 million in a gasification and syngas project at the Jiangsu Huai’an Saline-Alkali Technology Industrial Park. 　　In May 2011, Liupanshui City in Guizhou Province reached a preliminary cooperation agreement with Yingde Gas Group; the latter planned to invest in the development of gas-related projects such as gasification and purification in that city. 　　On July 25, 2011, Shanxi Qiyi Coal Chemical Group and Yingde Gas Group successfully signed a contract. The project requires an investment of around 1 billion yuan, with a focus on developing the coal gasification facility in order to improve the economic efficiency of the coal-to-methanol project. 　　On August 31, 2011, Wuhai City in Inner Mongolia signed an investment framework agreement with Yingde Gas Group to use advanced coal clean gasification technology to produce a variety of industrial gases, and to construct syngas production projects in phases within the Wuhai City Coal Chemical Industry Park. 　　The 600,000 tons per year ammonia and 800,000 tons per year urea production project of Hebei Yangmei Zhengyuan Chemical Group, which began construction on October 10, 2011, was funded and operated by Air Products and Chemicals Inc., which installed two SpaceGasifiers capable of processing 3,200 tons of coal per day. 　　The project of Henan Zhongke Huahui Chemical Co., Ltd., which is currently under construction and aims to produce 360,000 tons of synthetic ammonia and 600,000 tons of urea per year, features two coal-water slurry gasification units with a capacity of 2,200 tons of coal (on a dry basis) per day each; these units are also invested in and operated by Yingde Gas Group. 　　Gasification is the key process in coal chemical projects. Whether it is direct coal liquefaction and indirect coal liquefaction aimed at producing oil products, co-generation of electricity from coal, or the production of synthetic ammonia, alcohol, and ether fuels from coal, gasification of coal is required as a first step. The function of gasification is to provide the raw material gas required for the production of coal chemical products; it serves as the foundation and core for the further development of such products. To a large extent, it determines whether the entire system can operate over long periods of time in a safe and stable manner, and it also influences the cost-effectiveness of coal chemical projects. For such an important device, can all companies accept outsourcing? 　　CCIN journalists interviewed various companies on this topic. 　　 　　 　　Choosing outsourcing: It can reduce investment and risks. What benefits can having a third party invest in and operate the gasification facilities bring to coal chemical projects? Companies willing to outsource believe that the main benefits lie in reducing investment and enabling specialized management. 　　Liu Jincheng, president of Hebei Yangmei Zhengyuan Chemical Group, told CCIN reporters that his company chose to have a third party invest in and operate the gasification unit for the project producing 600,000 tons per year of synthetic ammonia and 800,000 tons per year of urea. When talking about the reasons for cooperating with third parties, Liu Jincheng said that, from the perspective of overall economic development, specialized division of labor is a major trend. It is difficult for a company to achieve comprehensive leadership in multiple specialized fields at the same time; it needs to pursue diversified investments and specialized management. Second, most companies are facing tight funding conditions, and the interest costs on their funds are relatively high. Furthermore, the capital cost of building coal chemical projects is high; the total investment for a project with an annual capacity of 600,000 tons of ammonia synthesis and 800,000 tons of urea production is 3.798 billion yuan. When a third party is responsible for constructing the gasification units, including those for purification, water treatment, and air separation, half of this investment is accounted for by such third parties. As a result, the company’s own investment in the project decreases, the risk associated with the project is reduced, and this also **alleviates the financial pressure on the company regarding project construction. Third is the issue of industrial optimization. It is built and operated by third parties, who possess their own professional advantages, while enterprises have their own strengths in ammonia synthesis and urea production. In this way, companies can not only reduce their initial investment but also expand their core industries, which is beneficial for their long-term development. 　　Sun Yongkui, deputy general manager of Yankuang Guotai Chemical Co., Ltd., told CCIN reporters that domestic companies currently face difficulties in obtaining loans, and the interest rates are high – generally exceeding 6% per year, with some rates even increasing by 15% to 20% on top of the existing rates. If the investment in gasification facilities, including purification, water treatment, air separation, and other systems, is around 1.5 billion yuan, the annual interest cost will be close to 100 million yuan; for companies that lack financial resources, the return on investment for such projects is relatively low. If the gasification unit is built through a third party and outsourced, it can alleviate the shortage of construction funds. 　　Lu Zhengtao, the chief engineer of Beijing Aerospace Wanyuan Coal Chemical Engineering Technology Co., Ltd., also said that domestic fertilizer companies generally lack funds; by adopting a cooperative or joint venture approach and having a third party invest in the construction of gasification facilities, the localization of raw materials can be accelerated. Currently, nitrogen fertilizer manufacturers generally use a fixed-bed batch gas production process. This process is not advanced. Only by adopting advanced pressurized gasification technology can local coal be burned and the raw coal be locally processed. This is the direction of development for these enterprises. However, the nitrogen fertilizer industry has been operating with slim profits for decades, with no capital accumulation; moreover, banks have tightened lending, leaving limited support funds available. Many nitrogen fertilizer companies hope to adopt this model of third-party investment. 　　As early as 2007, Huisheng Engineering (China) Co., Ltd. established a water-coal slurry gasification unit in the Nanjing Chemical Industrial Park, supplying gases such as carbon monoxide, hydrogen, and syngas to companies in the park including Syneron Corporation of the United States, Air Products and Chemicals of the United States, and Yangzi Petrochemical-BASF Co., Ltd. Xin Chengqin, Technical Director for Coal Chemicals at Huisheng Engineering (China) Co., Ltd., told CCIN reporters that third parties are usually specialized gas companies; they have more experience in the construction and operation of gasification units than the project owners, and know when it is necessary to use expensive equipment or materials and when cheaper ones will suffice, resulting in relatively lower investment costs. Once the device is built, it boasts high reliability and stability in operation, as well as low operational and management costs. 　　 　　 At present, many coal chemical enterprises in China are considering outsourcing their gasification units. The image shows a coal chemical enterprise in Shanxi discussing outsourcing matters with a gas company. 　　 　　 Choosing not to outsource: high technical risks and low profits. However, some industry experts also say that outsourcing the gasification process comes with certain risks and challenges as well, so it may not be a good option. 　　Fu Chungan, secretary-general of the China Industrial Gas Industry Association, said that gas giants at home and abroad generally specialize in air separation. Gasification and air separation are two different production processes. Air separation is the process of separating air using cryogenic technology to produce oxygen and nitrogen ； Coal gasification is the production of gas from coal at high temperatures. From air separation to gasification, it represents a step forward in terms of technical level. 　　According to CCIN reporters, some gas companies are also cautious about entering the gasification outsourcing market. 　　Bao Yangmin, Director of the Coal Chemicals Business at Praxair (China) Investment Co., Ltd., told CCIN reporters that gasification has a much lower added value compared to carbon-based chemical products such as methanol and acetic acid. So, for now they will not engage in the gasification business. 　　Jiang Jie, Business Development Manager at Air Products (China) Investment Co., Ltd., also admitted that although coal gasification falls under the category of gas-related services, multinational gas companies place great emphasis on the reliability and cost-effectiveness of the technology. Due to the differences in coal types in different countries, different gasification technologies are chosen, which in turn results in varying investment costs. Therefore, some multinational gas companies are very cautious about outsourcing gasification. 　　Sun Yongkui said that there is a risk associated with having a third party invest in the construction of the gasification facility: if one party fails to operate the facility properly due to issues with the facility itself or market conditions for the products, the other party is required to provide compensation as agreed. Wang Yongsheng, deputy general manager of Xinxiang Zhongxin Chemical Co., Ltd. under Henan Yongmei Group, also admitted that for third parties to invest in the construction and operation of gasification facilities, it depends on them to ensure that these facilities can be integrated promptly with subsequent product production units and that the supply of gas meets the required standards. This is equivalent to relying on a third party for the cost-effectiveness and safety of subsequent products. 　　Professor Yu Guangsuo, director of the Clean Coal Research Institute at East China University of Science and Technology, believes that a product can be profitable only if it is produced throughout the entire process; if the key gasification facility is built by a third party, it reduces the profitability of the product. If the main gasification equipment is also outsourced, what will the company use to generate profits? 　　Jiang Jianhui, deputy general manager of Jiangsu Linggu Chemical Co., Ltd., believes that if coal chemical enterprises have the capability, it is better for them to build gasification units on their own. Because only in this way can the profits from new products be ensured. Moreover, gasification is the cornerstone of coal chemical plants; if the gasification unit does not operate properly, it will directly affect the operation of the subsequent units. If coal chemical enterprises build gasification units on their own, they can take control of the entire production facility. 　　 　　 　　Industry experts predict that the construction of coal chemical plants will become more diversified. Many professionals in the coal chemical industry believe that centralized supply of industrial gases is a scientific, economical, and efficient supply model that has been developed over more than a hundred years of exploration in Western countries where the industrial gases industry is advanced. As China’s coal chemical industry grows and develops, the requirements for gasification units become increasingly stringent, and outsourcing has emerged as a new approach for coal chemical construction. 　　Xin Chengqin told CCIN reporters that the companies entering the coal chemical industry at present are diverse, with many even being entities from other sectors such as coal mines and power companies. To build coal chemical projects, the gasification unit is the key component. Operating gasification units is extremely difficult; some companies lack the necessary talent in this area and are not skilled at it. For this reason, it is necessary to outsource the gasification facility for professional management. This helps to improve the professionalism of gasification facilities by drawing on advanced experience. Moreover, companies can adopt various forms of outsourcing, such as having others invest and handing over their raw coal and other materials to third parties ； Or finance the construction oneself and hand over the installation to someone else for management. Xin Chengqin believes that outsourcing coal gasification is conducive to improving China’s expertise in the coal chemical industry, and it may become a trend in the development of this industry during the 12th Five-Year Plan period. 　　Yang Chunseng, president of the Shandong Fertilizer Industry Association, believes that having a third party build and operate the gasification units represents a shift in the approach to investing in coal chemical industries. In fact, centralized gas supply is already a common practice internationally. In the past, our country did not develop a third-party centralized gas supply system, and this was constrained by two factors: firstly, domestic enterprises were still small in scale and did not need to cooperate ； Secondly, the credibility of the enterprises is low; once the chairman or general manager of the enterprise changes, they may refuse to acknowledge the previous gas supply prices, and third parties are reluctant to invest in such projects. With the development of China’s coal chemical industry, enterprises have grown in size, and the credibility of many of them has also improved. Moreover, some coal chemical projects cannot be carried out by a single company; they are better suited to be built through cooperation among several companies. Currently, China has become the world’s largest coal chemical industry market as well as the largest gasification market, and outsourcing is a great approach. 　　Reporters from CCIN learned that in order to build the first domestic coal gasification outsourcing project to commence construction – the project at Henan Zhongke Huihuang Chemical Co., Ltd., which is capable of producing 360,000 tons of synthetic ammonia and 600,000 tons of urea per year – more than 40 trainees from the third-party company Yingde Gas Group are currently receiving training at Yankuang Guotai Chemical Co., Ltd. and Yankuang Lunan Fertilizer Plant. Industry experts believe that in the future, gas companies that develop outsourcing services for gasification are also likely to become coal chemical enterprises that master a variety of gasification technologies. The stability of the gasification unit and the gas supply volume are crucial for coal chemical projects. The image shows staff checking the gas supply of the device. (Photo provided by CFP) http://www.ccin.com.cn/templet/ccin/ShowTopic.jsp?id=46