Second draft for public comments on the “Guiding Opinions on Regulating Demonstration Projects for Coal-Based Fuels”

This news is a bit outdated; the environmental impact assessment for the Lu’an 180 project still hasn’t been approved.

These guidelines will affect the entire 13th Five-Year Plan period; they are being brought up for discussion, not as news. How can one draw conclusions based on the age of a news story?

During the 13th Five-Year Plan period, how can the coal chemical industry overcome the environmental protection challenges? “During the 13th Five-Year Plan period, efforts will be accelerated to build a modern energy system that is safe, clean, efficient, and low-carbon. The top priority is to control coal consumption; by 2020, it is aimed to reduce the share of coal in total primary energy consumption to below 62%. At the same time, efforts will be made to improve the clean use of coal, with moderate development of modern coal chemical industries. “During the 13th Five-Year Plan period, efforts will be accelerated to build a modern energy system that is safe, clean, efficient, and low-carbon. The top priority is to control coal consumption; by 2020, it is aimed to reduce the share of coal in total primary energy consumption to below 62%. At the same time, efforts will be made to improve the clean use of coal, with moderate development of modern coal chemical industries. In recent years, the coal chemical industry has faced increasingly severe challenges, with environmental constraints being the most prominent one. The regional environmental capacity and the requirements for pollution control have become insurmountable obstacles for this industry. Last year, the exposure of the pollution incident in the Tengger Desert sent shockwaves through the industry; this year, numerous coal chemical projects have also gotten stuck at the environmental impact assessment stage. This situation will naturally be reflected in the 13th Five-Year Plan. Recently, some preliminary ideas have been formulated regarding the 13th Five-Year Plan; environmental assessments will become stricter. So, how can the coal deep-processing industry undergo a transformation under the new policies outlined in the 13th Five-Year Plan? It is reported that at present, China’s environmental carrying capacity has essentially reached its limit, smog is a serious problem, and energy development faces numerous major challenges, including an unreasonable industrial structure. Moreover, energy utilization is extensive, with the overall energy efficiency falling below 40%; there is a lack of technological innovation, and core technologies as well as key equipment such as gas turbines and power electronics lag far behind those in foreign countries. “Our country has entered a strategic period of opportunity to advance the energy revolution. ”**Zheng Fengneng, head of the Energy Section in the High-Tech Department of the Ministry of Science and Technology, revealed that during the 13th Five-Year Plan period, efforts will be accelerated to build a modern energy system that is safe, clean, efficient, and low-carbon. The top priority is to control coal consumption; by 2020, it is aimed to reduce coal’s share in total primary energy consumption to below 62%. At the same time, efforts will be made to improve the clean use of coal, with moderate development of modern coal chemical industries. Six development plans. “At present, the National Energy Administration has come up with some preliminary ideas regarding the ‘13th Five-Year Plan’ for the coal deep processing industry.” ”**Li Ye, the chief economist of the Energy Bureau, said this at the recently held “2015 China International Coal Chemicals Development Forum”. Its preliminary concept proposes six development principles, five types of model upgrade demonstrations, and seven key tasks for the next steps. The six development principles are as follows: First, reasonably control the scale by determining the pace and extent of industrial development based on technological progress, without pursuing large-scale capacity expansion at the current level of technology. Second, promote upgrading and demonstration efforts, focusing on enhancing energy efficiency, reducing resource consumption and pollution emissions, optimizing system integration, and lowering construction costs. Third, strengthen ecological and environmental protection; provided that water resources and environmental carrying capacity permit, construction projects must adhere to the strictest environmental standards. Fourth, enhance independent innovation, with an emphasis on demonstrating domestically developed technologies and equipment. Fifth, in the deep processing of coal, priority should be given to utilizing existing coal production capacity, so that the benefits of development can be shared across the coal industry. Sixth, ensure coordinated development with the oil, gas, and petrochemical industries by leveraging their respective strengths and integrating the utilization of various fossil fuels. Li Ye admitted that due to environmental constraints, it is difficult for all 12 coal-based fuel projects for which preliminary work has been approved to be implemented during the 13th Five-Year Plan period. To this end, “increasing the supply of clean fuels and leveraging the positive role of coal-to-oil and coal-to-natural gas in pollution prevention and control” has been included as one of the seven key tasks for the industry in the next phase of implementation. Five upgraded demonstration models. At the same time, the coal chemical industry also faces an urgent need for innovation and upgrading. “‘During the 12th Five-Year Plan period, China’s coal chemical industry developed rapidly and ranked among the leaders in the world, but how much of the core technologies are actually in China’s possession? Wang An, chairman of China National Coal Energy Group, posed this question at the annual meeting of the Coal Chemical Industry Committee of the Petrochemical Federation recently. Wang An believes that the 13th Five-Year Plan period is a crucial time for China’s petroleum and chemical industry to transition from being a large player to a leading power. To shift from a “follower” strategy to a “leader” strategy, it is essential to forge a new path for transformation and breakthrough. Li Shousheng, president of the China Petroleum and Chemical Industry Federation, pointed out in this regard that the concept of \"piloting\" during the 13th Five-Year Plan period emphasizes \"upgrading through piloting\", with the focus of such upgrading lying on technological advancement. This demonstration focuses on five aspects: advanced gasification technology, advanced synthesis technology, key core equipment technology, differentiated terminal product technology, and cost advantages. Li Ye also revealed that the Energy Bureau has initially proposed five types of demonstration projects for upgrading during the 13th Five-Year Plan period, namely coal-based ultra-clean petroleum products, hierarchical and quality-based utilization of low-grade coal, coal-to-natural gas, comprehensive utilization of coal and oil, and production of important chemicals from coal. Furthermore, as a result of the substantial investment during the 12th Five-Year Plan period, the coal chemical industry has begun to suffer from severe homogenization, and signs of overcapacity need to be addressed promptly. Taking coal-to-olefins as an example, according to incomplete statistics from the China Petroleum and Chemical Industry Federation, there are currently 53 coal-to-olefins projects that are in the preliminary stage or have been planned, with a total production capacity of around 33 million tons. If all these projects are completed, the output of coal-to-olefins will far exceed domestic market demand. Li Shousheng pointed out that most polyethylene and polypropylene products are concentrated under a few general-purpose brands; there are very few high-end or specialty brands. Without proper regulation, this could lead to a risk of overproduction. Despite numerous challenges, as the top-level planning for the upcoming 13th Five-Year Plan is officially released, the path for industry development will become increasingly clear. The gradual implementation of a series of industrial support policies will also safeguard the development of the industry. Li Ye also noted that the **Energy Bureau will work with relevant departments to study support policies for the deep processing of coal, such as incentives for the first set of equipment. At the same time, taking full account of the differences between coal-to-oil production and the refining process, research is conducted on a VAT rate suitable for coal-to-oil production. Furthermore, the differences between coal-derived oil products and petroleum-based products in terms of scarcity and cleanliness will be taken into account to establish a consumption tax applicable to coal-derived oil. Relevant industry norms and standards will also be established, ultimately forming a comprehensive system for the coal chemical industry. “Walking on “two legs” to explore market potential – Industry experts believe that product differentiation and customized services can also enable coal deep-processing enterprises to achieve substantial profits. For example, Sunstone Company keeps a close eye on port shipping schedules and traders’ replenishment needs, and has signed custom production contracts for 6,000 tons of packaged products. This differentiated strategy results in the price of bulk urea (without packaging) at the loading dock being higher than the market price, generating profits of over 200,000 yuan for the company. “Be proactive in developing both domestic and international markets; the market is the source of profits. ”Industry insiders point out. The coal chemical sector should pursue a two-pronged approach, actively expanding both domestic and international markets. The chemical enterprises in the coal chemical sector focus on leveraging their traditional marketing advantages, continuously developing a network that includes distributors, retail outlets, and large-scale farmers. They extend their sales networks to the grassroots level, establishing direct fertilizer sales stores in villages, and setting up demonstration fields and testing bases in certain areas, so that consumers can see the advantages of the products firsthand. This approach helps to increase the market share and sales volume of these products in those regions, as well as to strengthen the brand image of these products in those sales areas. In terms of market expansion, the approaches adopted by some companies are worth emulating by the industry. For instance, Hubei Sanning Company adheres to the eight-character principle of “integrity, brand, network, and service”. It has developed over 1,000 distributors and 12,000 retail outlets nationwide. The company provides customers with services such as market information, forecasting, agrochemical solutions, payment processing, shipment arrangements, and after-sales support, thereby strengthening and enhancing the loyalty of its distributors. Henan Jinkai Company has been diligently advancing the “Thousand Towns, Thousand Stores Project”, while providing agricultural technical services and guidance to farmers and large-scale growers. Sunstone Company has successively taken over the urea sales operations of companies such as Jinfeng, Tianyuan, and Jinxiang, steadily advancing the unified sale of urea in the Shanxi region. By leveraging the advantages of coal and chemical industry integration, it enhances the economic efficiency of the enterprise. Faced with issues such as overcapacity and fierce competition in the domestic market, it is also a good approach for the coal chemical sector to look abroad, take proactive actions, and actively explore international markets. For instance, Sunstone Company has been actively working on its port sales operations. In response to fluctuations in the RMB exchange rate, it promptly reached an agreement with its distributors regarding the outright purchase of nearly 20,000 tons of goods. The impact of the exchange rate fluctuations alone generated nearly 450,000 yuan in revenue for the company. At the same time, close attention was paid to the situation of goods arriving at the port, and nearly 15,000 tons of supplies were purchased at high prices from the port, generating significant benefits for the company. The liquid ammonia products filled in cylinders by Zhejiang Jinju Company were exported abroad in June and September, destined for **Arabia** and Cameroon in Africa. The product quality standards and testing results met the requirements of foreign clients, and the excellent quality of the products won their recognition. New products bring new profits. Pan Aihua, deputy director of the Raw Materials Industry Department of the Ministry of Industry and Information Technology, said at the forum that it is necessary to accelerate the establishment of regulatory standards for industries such as coal-to-olefins and coal-to-ethylene glycol, in order to encourage coal chemical enterprises to transform and upgrade through technological innovation and enhance their core competitiveness. New products are new selling points; they can bring in new profits. In response to the diverse demands of the current fertilizer market and the rapid development of new types of fertilizers, the coal chemical industry encourages chemical enterprises to actively develop new fertilizers. This helps meet market needs, create additional profit streams, and increase market share. New products serve as new selling points. On September 9, the 200,000 tons per year urea-based compound fertilizer production facility of Henan Jinkai Company began operations, successfully producing high-concentration urea-based compound fertilizer. From now on, the company will be able to manufacture a variety of new products, including urea-based compound fertilizer, blended fertilizers, and coated slow-release fertilizers. On September 14, Hubei Huaqiang Company successfully developed a slow-release, long-acting peptide urea, with daily production exceeding 400 tons. On September 22, the company successfully launched production of zinc humic acid urea for the first time, with an average daily output of 400 tons; the quality rate of the product at first-class standard reached 100%. These are all excellent examples of new products developed recently in the coal chemical sector. It is understood that 5,200 tons of peptide urea and 2,300 tons of zinc humic acid urea have been produced in accordance with orders. The price of these two types of urea is more than 200 yuan per ton higher than that of regular urea, which has made them very popular among farmers. At the same time, this has contributed to a comprehensive upgrade of the company’s product portfolio, thereby enhancing the market competitiveness of its products. To address the sluggish market conditions due to low prices for caprolactam, Hubei Sanning Company has actively pursued innovations in product formats by introducing a solid granulation system for caprolactam. This system transforms liquid caprolactam into solid particles through low-temperature cooling, followed by packaging, so as to meet the requirements for long-distance transportation or storage. Solid granulation not only avoids the \"cold war\" over liquid prices and increases the added value of products, but also expands the range of products, earning positive feedback from users. At the same time, the company also succeeded in expanding its industrial chain; its products shifted from urea and compound fertilizers at 2,000 yuan per ton to nitro-sulfur compound fertilizers at over 4,000 yuan per ton, as well as caprolactam at 10,000 yuan per ton, resulting in a significant increase in added value. Coal companies are trapped in a slump caused by low prices. Winter heating season is approaching in 2015, yet there is no sign of improvement in the coal industry. Recently, with Shenhua Group reducing the price of coal for the seventh time and other coal companies following suit, the coal industry may enter a state of widespread losses. From the perspective of power plants, after October arrived, the average daily coal consumption of the six major power generation groups remained at around 460,000 tons, compared to 540,000 tons per day during the same period last year, and as high as 610,000 tons per day in the corresponding period of 2013. From these figures, it is evident that the adjustment of the economic structure and the slowdown in growth rate have had a significant impact on the coal market. In previous years, as the winter storage season approached, whenever Shenhua Group and China National Coal Group “issued a call to action,” coal companies would promptly follow suit by maintaining high prices. This phenomenon may now be “a thing of the past.” According to the notifications sent by Shenhua to its downstream customers, the listed prices for Shenhua’s coal in October are as follows: Shenhuan 1 – 5500 kcal/kg at 390 yuan per ton; Shenhuan 2 – 5200 kcal/kg at 364 yuan per ton; Shenhuan 5 – 5000 kcal/kg at 350 yuan per ton; Shenhuan 3 – 4800 kcal/kg at 332 yuan per ton; Shenhuan 4 – 4500 kcal/kg at 310 yuan per ton; Zhun 2 – 4900 kcal/kg at 337 yuan per ton; Shitan 7 – 4800 kcal/kg at 322 yuan per ton. Industry analysts point out that since Shenhua Group’s prices before the introduction of these discounts were significantly higher than market prices, and given the weak demand from downstream industries at present, the prices of other large coal companies are also lower than those of Shenhua Group. Therefore, it was expected that Shenhua Group would introduce such discount measures. While coal prices have been reduced through such deification measures, demand for coal in downstream industries has actually declined. Data shows that as of October 9, the daily coal consumption of the six major power plants along the coast was 478,000 tons, a 14.8% decrease compared to the previous year; meanwhile, the number of days during which these power plants could rely on their coal reserves was 28.5 days, an increase of 3.5 days compared to the previous year. In fact, well before the National Day holiday, coal industry giants China National Coal Group and Shanxi Coal Industry Group both introduced price cut plans. As a barometer of the market, Shenhua’s price cut is undoubtedly adding to the difficulties. Data from the China Coal Industry Association show that in the first half of this year, over 70% of large and medium-sized coal enterprises across the country suffered losses, with the coal industry in provinces such as Heilongjiang, Jilin, Liaoning, Hebei, Shandong, and Anhui experiencing overall losses. After three consecutive years of significant declines in domestic coal prices, the price of 5,500 kcal thermal coal at the Qinhuangdao Port has dropped from 860 yuan per ton in November 2011 to the current level of 490–400 yuan per ton, representing a decrease of over 50%. Meanwhile, the price of coking coal has fallen from a peak of 2,100 yuan per ton to less than 900 yuan per ton currently, a decline of nearly 60%. “Currently, the price of 5,500 kcal coal is around 390 yuan per ton, while the cost exceeds 400 yuan per ton. Overall, coal prices are in a reverse pricing situation. With another round of price cuts and promotional offers by coal companies, prices are likely to fall further, inevitably increasing the companies’ losses. ”. said Deng Shun, an analyst in the coal industry. Thanks to its ownership of coal mines, railways, and ports, Shenhua currently has the lowest coal production costs in the country. However, its coal business operated at a minimal profit level during the first half of the year, and coal prices continued to fall in July, August, September, and October. It is likely that Shenhua’s coal business will also incur losses in the second half of the year. Coupled with these price cuts and promotional measures, the entire coal industry is on the verge of suffering widespread losses.

“The draft version of the 13th Five-Year Plan has been prepared, driving transformation in the coal chemical industry. The much-anticipated 13th Five-Year Plan for the coal chemical sector now has a draft form; it specifies that coal energy efficiency needs to be improved in order to control production in this industry and ease supply-demand imbalances. Additionally, efforts will be made to carry out demonstrations and promote innovative development through five different models. At the same time, efforts will be made to further develop related industries such as petrochemicals and oil and gas, as well as to establish standards for these industries. With the introduction of the 13th Five-Year Plan for the coal chemical industry, there will be pressure to drive transformation and upgrading within this sector, toward a model focused on quality and efficiency. By relying on technological innovation, it is possible to pursue a new path of development that features low resource consumption, high technical content, good quality and efficiency, as well as sustainability. Although coal chemical industry is regarded as an effective approach for the coal industry to optimize its internal energy structure. It should be noted, however, that China’s coal chemical industry as a whole still faces issues such as blind development, severe product homogenization, and heavy pressure on water resources and the environment. In particular, the sharp drop in international oil prices in recent years has led to a situation where the prices of coal chemical products are lower than those of oil, causing serious impacts on the industry. Hu Qianlin, secretary-general of the Coal Chemicals Committee of the China Petroleum and Chemical Industry Federation, said that at present, most coal chemical projects suffer from insufficient levels of processing and conversion, with downstream products mostly being low-value-added primary products, which results in a weak impact on local economies. The rational placement of coal chemical projects and achieving industrial upgrading through structural adjustment of industries is the most effective way for these regions to transform their resource advantages into economic advantages. It is understood that in response to the aforementioned situation, the 13th Five-Year Plan for the coal chemical industry designates product differentiation, high-end development, and increased added value as its development directions. Priority will be given to extending the industrial chain, broadening the range of products, and developing new coal-based chemicals. According to Li Ye, the chief economist of the **Energy Bureau**, the bureau has proposed five models for demonstration purposes in terms of upgrading technologies: the production of ultra-clean oil products from coal, the graded and differentiated utilization of low-grade coal, the production of natural gas from coal, the integrated utilization of coal and oil, and the production of important chemicals from coal. At the same time, it is necessary to adhere to a scientific and rational layout. The placement of coal chemical projects should take into account factors such as financial capacity, technological strength, talent resources, and environmental carrying capacity, while emphasizing industrial park development, large-scale operations, flexibility in production, and product differentiation as key features. It is reported that China has currently approved a total of 27 modern coal chemical industry demonstration projects; of these, 13 are coal-to-natural gas projects, and once fully operational, their production capacity will amount to 61.1 billion cubic meters per year ； There are 8 coal-to-oil projects, with a production capacity of 11.08 million tons per year ； There are 6 coal-to-olefins projects, with a production capacity of 5.1 million tons per year. There are 26 coal-to-oil projects, 58 coal (methanol)-to-olefins projects, and 67 coal-to-natural gas projects that are in the stages of operational testing, construction, and preliminary work. If all are put into operation, it is estimated that by 2020 there will be a production capacity of 40 million tons of coal-to-oil products, 41 million tons of coal-to-olefins products, and 280 billion cubic meters of coal-to-natural gas output. According to predictions by the Petroleum and Chemical Industry Planning Institute, by the end of the 13th Five-Year Plan period, the substitution rate of China’s coal chemical industry for oil and natural gas is expected to reach 12.5%. Hu Qianlin said that in the coming years, there will still be a significant shortage of basic raw materials such as olefins and ethylene glycol in China, which presents good opportunities for the development of coal chemical industry. At the same time, with the stricter enforcement of relevant environmental protection regulations, regions will gradually phase out the previous extensive use of coal; coal chemical industry represents an important approach to achieving clean and efficient utilization of coal. Industry experts point out that the areas in which coal chemical industry will develop in the future, and at what pace, will depend on the advancements in coal chemical technology itself, as well as changes in oil supply and demand and the prices of related raw materials. (Source: China Energy Network)

The coal-to-gas demonstration project (fixed-bed gasification route) achieves an energy efficiency of ≥56%; the coal consumption required to produce 1,000 standard cubic meters of natural gas is ≤2.3 tons of standard coal, and the fresh water usage is ≤5.5 tons. ……The energy efficiency requirements are a bit lower