Analysis of the Current Status and Development Trends of China’s Coal Chemical Industry

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Our country is relatively rich in coal but short of oil; therefore, the appropriate and orderly development of modern coal chemical products holds strategic significance. Through years of effort, our country has developed and built modern coal chemical products, technologies, and equipment such as coal-to-oil, coal-to-olefins, coal-to-dimethyl ether, coal-to-ethylene glycol, and coal-to-natural gas, which have now reached a certain scale and laid a solid foundation for their further development. The coal chemical industry includes traditional coal chemistry and modern coal chemistry. Traditional coal chemical industries such as coke, nitrogen fertilizers, and calcium carbide are mature sectors, with large capacities, production volumes, and consumption levels at present. Modern coal chemical processes such as coal-to-oil, coal-to-olefins, coal-to-dimethyl ether, coal-to-ethylene glycol, and coal-to-methane gas are all products with high demand and significant shortages in the domestic market at present, offering considerable potential for market development. China’s modern coal chemical industry is currently still in the industrial demonstration stage, with very low actual production volumes, yet there is great enthusiasm for its development. 　　I. Current Development Status of Major Products in the Coal Chemical Industry (1) Current Situation of the Coal-to-Oil Industry In 2010, China’s crude oil production was 203 million tons, while the actual amount processed was 423 million tons. The country’s crude oil imports amounted to 239 million tons, resulting in a dependence on imported crude oil of 53.8%. Based on China’s economic and social development needs, it is estimated that the country’s oil demand will reach 500 million tons in 2015. However, constrained by resource shortages, China’s annual crude oil production can only be maintained at 200 million tons in the coming years. Therefore, it is expected that in 2015, China’s dependence on oil imports will rise to 60%. China still needs to import large quantities of crude oil and petroleum products, and faces serious oil security issues. To alleviate the supply and demand imbalance of oil and its derivatives in our country, developing coal-to-oil technology is of great significance. In 2009, several coal-to-oil demonstration projects in China were successfully commissioned one after another, and the coal-to-oil technologies of direct liquefaction and indirect liquefaction with independent intellectual property rights were initially validated. Given the success of the coal-to-oil demonstration projects, in December 2009, the Ministry of Commerce issued Announcement No. 122 of 2009, granting China Shenhua Coal-to-Oil Chemical Co., Ltd. and Shenhua Ordos Coal-to-Oil Branch the authority to engage in the wholesale distribution of refined oil products, thereby legitimizing the status of coal-to-oil products. 　　The overview of the coal-to-oil projects that were put into trial operation in China around 2009 is shown in Table 1. http://s13.sinaimg.cn/middle/673120a7hb86f6e08630c&690 On December 30, 2008, the 1.08 million tons/year direct coal liquefaction demonstration project for oil production in Ordos City, operated by Shenhua Group, began coal feeding trials. The following day, the entire plant process was successfully initiated, and qualified oil products were produced. The plant operated continuously for 168 hours at a load rate of 70%-75%, thus fulfilling all predetermined trial objectives. Building on the first operation, Shenhua Group addressed the issues that arose during that initial run, and conducted three more test runs in July, September, and December 2009. Through four operational tests, it has been confirmed that the directly liquefaction technology developed independently in China features a rational design and is technically feasible; its load rate and oil yield are close to the design values. It is expected that these values can be achieved after further improvements. Notably, significant progress has been made in localizing the imported equipment that affects the long-term stable operation of the facility, and the service life of high differential pressure valves and high-temperature solid-containing centrifugal pumps has been gradually extended, laying the foundation for large-scale industrial production. In addition, three industrial pilot plants utilizing the slurry-bed synthesis technology independently developed by Sinopec Synthetic Oil Co., Ltd. have also been put into operation one after another. Among them, Yitai’s 160,000 tons per year coal-to-oil project carried out in collaboration with Sinocat Synthetic Oil Company was successfully tested in March 2009 and went into full operation in September; to date, over 50,000 tons of oil products have been produced. Shanxi Lu’an Group’s 160,000 tons per year coal-to-oil facility produced qualified diesel and naphtha products in August. Shenhua Group’s 180,000 tons per year iron-based slurry-bed indirect liquefaction unit was also successfully put into trial operation at the end of 2009. 　　(II) Current status of the coal-to-methane gas industry In 2010, China’s domestic natural gas production was 94.48 billion cubic meters, imports amounted to 16.61 billion cubic meters, while the apparent consumption was 107.03 billion cubic meters. The per capita consumption was 67 standard cubic meters per year, which is far below the world average. 　　At present, natural gas accounts for only 4% of China’s primary energy consumption. In order to increase its share in the primary energy mix, improve the quality of life for the people, and meet the demands for improving the ecological environment, the central government has adopted a strategic approach that emphasizes both oil and gas, and actively encourages the development and utilization of natural gas resources. Over the next decade or so, China’s natural gas demand is expected to grow at a rapid pace, with an average growth rate of 13%. It is estimated that in 2015, the demand for natural gas will be around 170–210 billion cubic meters, resulting in a shortage of 30–70 billion cubic meters at that time. 　　Against the backdrop of a decline in newly discovered technically and economically recoverable natural gas reserves in China, increasing exploration difficulties, and a deterioration in the quality of newly found reserves, domestic enterprises have proactively advanced the industrialization process of coal-to-methane projects. Among them, two coal-to-methane projects with a capacity of 4 billion cubic meters per year each, operated by Datang Group in Chifeng, Inner Mongolia, and Fuxin, Liaoning, were officially approved by the **National Development and Reform Commission. The coal-to-methane project operated by Inner Mongolia HuiNeng also received official approval from the **National Development and Reform Commission in December 2009. Due to the rapid growth of the domestic natural gas market, strong expectations of rising natural gas prices, and the fact that construction of long-distance natural gas pipelines is already in progress, many companies (such as CNOOC, Shenhua, Huaneng, China Power Investment, CNPC, Huayin Power, Xinwen, and Qinghua) are optimistic about the coal-to-methane industry and intend to enter it. As a result, coal-to-methane has become a new focus for investment in the field of advanced coal chemical processing, with there being a keen desire to advance its industrialization. 　　According to incomplete statistics from the China Petroleum and Chemical Industry Federation, there are currently over ten coal-to-methane projects under construction, planned, or in the planning stage in China, with a combined production capacity exceeding 30 billion cubic meters per year (see Table 2). Among them, the coal-to-gas project of Datang International Power Generation Company in Chifeng City, Inner Mongolia, with a capacity of 4 billion cubic meters per year, is progressing the fastest and is scheduled to come online in 2012. 　　(III) Current status of the coal-based olefins industry In 2010, China had 24 ethylene production enterprises and 29 ethylene production units, with a total capacity of 15.19 million tons per year; the actual production volume was 14.188 million tons. The average scale of ethylene production enterprises has reached 633,000 tons per year, while the average scale of individual production units has increased to 524,000 tons per year. 　　In 2010, China’s apparent consumption of ethylene was 14.966 million tons. The equivalent consumption (calculated as domestic production + imports – exports + the converted value of net imports of downstream products) was approximately 29.6 million tons. The domestic self-sufficiency rate for ethylene stood at about 50.6%. It is estimated that in 2015, the domestic demand for ethylene equivalent will reach 32 million tons, with a shortage of around 10 million tons, indicating significant market potential. 　　Since 2009, the three major coal-to-olefins demonstration projects have continued to make steady progress. Currently, the main construction and installation of major equipment for the three demonstration projects have been completed. The fabrication and installation of steel structures, as well as pipeline prefabrication, are in full swing. The utility systems have been mechanically completed one after another and have entered the stage of individual unit commissioning. The details of the three demonstration projects are shown in Table 3. 　　Based on the progress of the demonstration project, the total investment required is around 18–19 billion yuan, which far exceeds the estimates provided in the feasibility study report, resulting in a low return on investment for the project. When international crude oil prices experience significant fluctuations or during downturns in the cycle of the petrochemical industry, the competitiveness and economic viability of demonstration projects will face considerable challenges. Preliminarily, the high investment costs for coal-based olefin demonstration projects are mainly due to the following reasons: first, the conditions available for carrying out such projects are poor, requiring the construction of all necessary infrastructure from scratch ； Secondly, coal-based olefin production requires substantial utility infrastructure, necessitating greater investment in the construction of boilers, power plants, power supply and distribution systems, circulating water systems, and sewage treatment systems ； Third, the plan optimization is inadequate; there are many imported technologies, resulting in high equipment manufacturing and transportation costs. Based on the progress of project construction, it is expected that the coal-to-olefins demonstration projects will be completed and put into trial operation over the next two years, with core technologies such as lignite drying, large-scale gasification, and methanol-to-olefins being tested during these trial operations. 　　In addition, new breakthroughs have been made in the independently developed methanol-to-olefins technology with proprietary intellectual property rights. In August 2009, the technology development project for fluidized bed methanol-to-propylene (FMTP), jointly undertaken by China National Chemical Engineering Group Corporation, Tsinghua University, and Anhui Huaibei Chemical Group, successfully completed the system process flow and achieved continuous and stable operation for 470 hours. 　　To guide the healthy development of the coal-to-olefins industry, in 2009 the Ministry of Industry and Information Technology commissioned the Petroleum and Chemical Industry Planning Institute to conduct research on a national plan for the layout of coal-to-olefins production capacity, with the aim of facilitating such planning and ensuring coordinated development with related industries such as coal, petrochemicals, and power generation. 　　According to statistics compiled by the China Petroleum and Chemical Industry Federation, there are currently nearly 30 coal-to-olefins projects under construction, planned, or in the planning stage in China. The total olefins production capacity of these projects exceeds 20 million tons per year, with a total investment of nearly 640 billion yuan. Among them, there are 10 projects that are in the construction phase. Among the projects that have already commenced, the project of the Datang Group in Dolun County, Xilin Gol League, Inner Mongolia, which uses lignite as raw material, is progressing the fastest. On October 18, 2010, the coal-to-olefins gasification unit was successfully started up for the first time, producing syngas. The progress of the remaining projects is slower, and for some of them, the accompanying methanol plants have already been built and put into operation. 　　(IV) Current status of the coal-to-dimethyl ether industry As international crude oil prices continue to rise and there is growing demand in China for dimethyl ether as an alternative energy source, this has spurred large-scale development of dimethyl ether production projects in the country. During the period from 2006 to 2009, China’s dimethyl ether industry experienced extraordinary growth. In 2008 and 2009, a total of 17 dimethyl ether projects became operational, with a combined production capacity of 3.175 million tons per year. By the end of 2010, China’s dimethyl ether production capacity had reached around 10 million tons per year. At present, most dimethyl ether manufacturers purchase methanol as a raw material; those that have their own methanol production facilities have an annual dimethyl ether production capacity of 2.66 million tons, accounting for 47% of the total production capacity ； The capacity that requires the purchase of methanol amounts to 3.04 million tons per year, accounting for 53% of the total capacity. In terms of production, according to incomplete statistics, China’s dimethyl ether production in 2010 was around 2.5 million tons, with an overall operational rate of the production facilities at only 25%, a decrease compared to 2008. In 2010, the consumption of dimethyl ether was 2.5 million tons, mostly used as a substitute for LPG in combustion. 　　According to incomplete statistics, there are currently over 60 dimethyl ether projects in the planning stage in China, with a combined production capacity of 37 million tons per year. If 30% of this capacity can be put into operation, China will add 10 million tons per year of dimethyl ether production capacity during the 14th Five-Year Plan period ； If 50% of the capacity can be put into operation, an additional 18 million tons per year of capacity will be added during the 12th Five-Year Plan period. Therefore, it is estimated that by the end of the 12th Five-Year Plan period, China’s dimethyl ether production capacity will reach 18–26 million tons per year. 　　(5) Current status of the coal-based ethylene glycol industry In recent years, the rapid development of China’s polyester industry has **increased the demand for its main raw materials, purified terephthalic acid (PTA) and ethylene glycol. Ethylene glycol is a downstream product of ethylene, and its production relies on facilities designed for ethylene processing; as a result, it is difficult for private enterprises to get involved in this sector. This has led to slower development of China’s ethylene glycol industry compared to that of PTA, another major upstream material for polyesters. 　　The supply-demand gap for ethylene glycol in the domestic market has drawn attention from the industry to coal-based ethylene glycol production. In December 2009, the world’s first coal-to-ethylene glycol project, the Tongliao Jinmei 200,000-ton/year coal-to-ethylene glycol industrial demonstration project, which was built using technology from the Fujian Institute of Research on the Structure of Matter under the Chinese Academy of Sciences, completed its entire production process. It underwent a week of trial operation and produced qualified products. The demonstration plant for coal-to-ethylene glycol will undergo further commissioning to meet the requirements for commercial operation. 　　In July 2009, Danhua Technology, together with its holding subsidiary Tongliao Jinmei Chemical Co., Ltd., its second-largest shareholder Shanghai Shengyu Enterprise Investment Co., Ltd., and Henan Coal Industry Sifang, signed a strategic cooperation framework agreement in Zhengzhou. The aim was to integrate the industrial resources of all parties in order to develop and strengthen the coal-based ethylene glycol industry, and to carry out exclusive cooperation on projects related to coal-based ethylene glycol production. 　　In October 2009, the 2×200,000-ton ethylene glycol and 2×200,000-ton coal tar hydrogenation cogeneration circular economy project of Inner Mongolia Kailuan Coal Chemical was officially launched in Ordos. The project is constructed in two phases, with a total investment of 8 billion yuan. Phase 1 requires an investment of 3.88 billion yuan and has a construction period of 3 years; once it began operations in 2012, work started on Phase 2. The project is expected to be fully completed and put into operation by 2013. 　　In mid-November 2009, two projects for the annual production of 200,000 tons of coal-based ethylene glycol, jointly invested in and developed by Henan Coal and Chemical Industry Group and Tongliao Jinmei Chemical Co., Ltd., commenced construction in Mengjin County, Luoyang, Henan Province, and Yongcheng City, Shangqiu, Henan Province, respectively ； At the end of November, the foundation was laid for the 200,000 tons per year ethylene glycol project, which was jointly invested in and built by them, within the site of the Yongmei Zhongxin Chemical Methanol Project in Huojia County, Xinxiang City, Henan Province. In early February 2010, the 200,000-ton/year ethylene glycol project of Zhongyuan Dahua Company, a subsidiary of Henan Coal and Chemical Industry Group, was fully launched. At the end of March 2010, the foundation was laid for Anhua Company of Henan Coal and Chemical Industry Group’s project to produce 200,000 tons of ethylene glycol per year. To date, Henan Coal and Chemical Industry Group has completed five coal-to-ethylene glycol projects, which will result in a production capacity of 1 million tons per year of coal-based ethylene glycol. 　　According to statistics from the China Petroleum and Chemical Industry Federation, the capacity of coal-based ethylene glycol production facilities in China that are already in operation amounts to 200,000 tons per year. There are 140,000 tons per year worth of ethylene glycol production projects currently under construction, while another 230,000 tons per year worth of such projects are planned for construction. 　　II. Analysis of the Development Trends in China’s Coal Chemical Industry (I) Projections for the Development of Key Coal Chemical Products Generally speaking, China faces a shortage of oil and gas. With the development of the economy and society, the demand for oil and petrochemical products continues to rise, meaning that the imbalance between supply and demand for these resources will persist in China for a long time. According to experts’ predictions, in 2020, China’s self-sufficiency rate for crude oil will be only about 40%, that for olefins around 60%. The self-sufficiency rate for liquefied petroleum gas used in households will be less than 70%, and the degree of self-sufficiency in natural gas is also relatively low. It is expected that demand for petroleum substitutes such as coal-based methanol, dimethyl ether, olefins, petroleum products, and natural gas will experience rapid growth, providing a broad market for the development of modern coal chemical industry. 　　Based on the development trends of the modern coal chemical industry, the projected output of major coal chemical products in China in 2015 and 2020 is shown in Table 4. http://s11.sinaimg.cn/middle/673120a7hb86f79e3c24a&690 Methanol is a major raw material or intermediate product in modern coal chemical industry. Its development is influenced by the prospects for the application of alcohol-ether fuels, thus involving considerable uncertainty. In 2010, China’s methanol production reached 15.743 million tons; it is expected to hit 40 million tons by 2015. Coal-based dimethyl ether will also see significant development, with production expected to reach 12 million tons by 2015. By 2015, the production of coal-based olefins and coal-based oil in China is expected to reach 5 million tons and 10 million tons respectively, while the production of coal-based methane gas is estimated to reach 7.2 billion standard cubic meters by that year. In 2015, the domestic demand for ethylene equivalent was approximately 33 million tons, while ethylene production amounted to about 22.1 million tons, resulting in a self-sufficiency rate of roughly 65%. There is still a significant market gap for olefin products in our country. 　　(II) Development trends of the coal chemical industry Based on an analysis of the current status of the coal chemical industry at home and abroad as well as the consumption trends of related products, China’s coal chemical industry is expected to show the following development trends in the future: 1. An upward trend toward larger-scale facilities With the development of China’s modern coal chemical industry, along with the demands for energy conservation, emission reduction, and the promotion of a circular economy, China’s modern coal chemical products are gradually moving toward larger-scale production facilities. In 2008, China’s methanol production capacity increased by about 4 million tons per year; among this increase, capacity of 400,000 tons per year or more accounted for 54% of the total new capacity, while capacity ranging from 200,000 to 400,000 tons per year accounted for 34%, with capacity of less than 100,000 tons per year accounting for only 12%. During 2009–2010, the total capacity of methanol projects under construction or planned in China was approximately 12 million tons per year. Among these, there were 13 projects with a planned capacity of 600,000 tons per year or more, 7 projects with a planned capacity of 400,000–500,000 tons per year, and around 17 projects with a planned capacity of 200,000–400,000 tons per year. These projects indicate that China’s methanol production facilities are gradually moving towards larger scales. 　　2. Continuous technological progress and a clear trend toward domestic production of equipment: Significant progress has been made in the local application of technologies such as gasification, coal coking, methanol synthesis, and large-scale air separation in the field of coal chemical industry. In terms of coal gasification, China has successfully applied domestic coal water slurry gasification technologies (multi-nozzle coal water slurry, multi-component slurry) as well as dry powder coal gasification technologies (two-stage pressurized coal gasification technology, ash polymerization gasification technology, Ende gasification technology). Significant progress has been made in domestic large-scale methanol synthesis technology, with multiple plants having been put into operation, each with an annual production capacity of 200,000 tons ； Currently, domestic air separation technology is generally capable of meeting the requirements of coal chemical industries, with each unit having an oxygen production capacity of 60,000 standard cubic meters per hour. In addition, the development of proprietary technologies in modern coal chemical industry is also accelerating, such as domestic coal-to-olefins technology, domestic coal-to-oil technology, and domestic coal-to-L-alcohol technology. Nevertheless, there is still a significant gap in domestic technology in terms of the processing capacity per unit system and the lifespan of key equipment; therefore, the localization of technology and equipment will remain an important direction for the development of the coal chemical industry. 　　In recent years, significant progress has been made in the technical development and industrial demonstration of modern coal chemical industry in our country. At the end of 2008, the 1.08 million tons/year coal direct liquefaction demonstration plant of Shenhua Group successfully completed its commissioning and trial operation ； In March 2009, the 160,000-ton/year indirect coal liquefaction project of Inner Mongolia Yitai Group successfully completed its commissioning trial run. In recent years, a number of modern coal chemical projects have been constructed, including the 160,000-ton/year demonstration plant for indirect coal liquefaction by Shanxi Lu’an Group, the 180,000-ton/year indirect coal liquefaction plant by Shenhua Group, the Shenhua Baotou MTO project, the Shenhua Ningxia Coal Industry MTP project, the Jinmei coal-to-ethylene glycol project, as well as several large-scale coal-to-methane projects currently under construction. It is expected that in the future, the industrial application of modern coal chemical projects such as coal-to-oil, coal-to-olefins, coal-to-methane gas, and coal-to-ethylene glycol will be further promoted. 　　3. A trend toward more rational industrial layout 　　In recent years, China’s coal chemical industry has developed at a rapid pace, with projects such as methanol and dimethyl ether emerging in large numbers. Similar projects are being established or planned in areas where coal resources are available, and some regions are already facing resource and environmental problems resulting from the development of this industry. From the perspective of **energy development, the rapid growth of large-scale modern coal chemical industries to a certain extent will lead to more pronounced resource and environmental issues. Therefore, a rational industrial layout is essential, and it will serve as an important criterion for approving projects in the future**. 　　4. Energy conservation, emission reduction, and comprehensive resource utilization are the directions for industry development. In the modern coal chemical production process, large amounts of energy are consumed and numerous pollutants are generated; therefore, vigorously developing projects related to energy conservation, emission reduction, and comprehensive resource utilization is an important trend in the advancement of coal chemistry. 　　The future development of coal chemical industry should focus on efficient resource utilization and recycling, adhering to the principles of reduction, reuse, and recycling. Attention should be paid to promoting resource and energy conservation as well as clean production, reducing waste generation, strengthening the management and recycling of waste materials, ensuring their harmless treatment, and minimizing pollutant emissions. The development of the coal chemical industry should further achieve resource recycling and hierarchical utilization of energy with industries such as thermal power generation, building materials, oil and gas extraction, coalbed methane extraction, chemicals, agriculture, and food processing. 　　5. Concentration of production factors in competitive enterprises Modern coal chemical industry is a technology-intensive and capital-intensive sector; it should adopt construction and operation methods that are most conducive to efficient use of resources, reduction of pollution, protection of the environment, and improved efficiency, in order to achieve sustainable development. To this end, it is necessary to adhere to integration of mineralization, establishment of bases, development of industrial parks, scaling up, and modernization, while implementing intensive management. The development of modern coal chemical industry is challenging and relies on large enterprises with high quality and strong capabilities. 　　6. “Horizontal integration” is an inevitable choice for the development of modern coal chemical industry. The current energy situation has given rise to the modern coal chemical industry, which is an inevitable outcome of development. Developing coal-based chemical industries to provide the chemical raw materials that were previously dependent on oil, and to enable the use of limited oil resources to produce fuel oils in high demand in the market, is undoubtedly an effective way to alleviate the shortage of crude oil resources and the pressure associated with heavy reliance on imports. However, modern coal chemical industry is a sector that requires a high level of capital and technology, and it is constrained by various factors such as coal resources, water resources, and environmental regulations. How to improve resource utilization, reduce energy consumption and pollution emissions, enhance scale effects, and increase the added value of products are issues of widespread concern in the industry. 　　Against the backdrop of the growing trend toward a global low-carbon economy, from both practical and long-term perspectives, it is an inevitable requirement for the efficient, energy-saving, and environmentally friendly development of modern coal chemical industry to pursue inter-industry co-production. Developing coal-to-oil and coal-to-olefins separately, even if they could replace 50 million tons of oil products by 2020, would require the use of 200 million tons of coal – which is only 1/10 of the oil demand at that time – and it would also involve enormous investment costs. If the coal chemical industry achieves co-production with the petrochemical industry on a broader scale through inter-industry integration, it is possible to optimize resource utilization, maximize energy use, and minimize pollution emissions. Therefore, from now on, the development of modern coal chemical industry should emphasize multi-party cooperation, break down industry barriers, and accelerate the advancement of IGCC (Integrated Gasification Combined Cycle with multiple product outputs). Author: Wang Xiaofeng, Cai Enming, Industry Development Department, China Petroleum and Chemical Federation. Source: \"China Petroleum and Chemical Economic Analysis\", Issue 12, 2011