Why are coal chemical projects that have obtained approvals described as being in a difficult situation from which it’s hard to escape?”

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Why are coal chemical projects that have obtained approval in such a difficult situation? Author/Source: Date: 2016-04-12 Clicks: 11 While acknowledging the positive impact of these measures on the long-term development of the modern coal chemical industry, industry experts also stated in discussions with the author last week that the negative effects of the implementation of these admission requirements cannot be underestimated. For those unfinished projects, especially those that had previously received approval from the National Development and Reform Commission, changes in relevant requirements may result in additional investment amountsing to hundreds of millions or even billions of yuan, which is certainly a major challenge. With current low international oil prices and a significant decline in the profitability of modern coal chemical projects, this could lead to a sharp reduction in investment in such projects, resulting in a slowdown in the development of this industry. According to the access requirements, more than 10,000 people need to be relocated in the area surrounding the Pingliang Huahong Huijin coal chemical project, which is 10 times more than the original figure ； The environmental protection investments for Shenhua Baotou’s Phase II project, which has an annual production capacity of 700,000 tons of coal-derived olefins, have surged to 2.1 billion yuan, accounting for over 11% of the total investment in the project. Projects that have received approval letters find it difficult to move forward. In the view of Wang Weifeng, former general manager of Pingliang Huahong Huijin Coal Chemical Co., Ltd. under Shaanxi Xingwang Enterprise Group, the implementation of these \"access requirements\" represents a real test for those projects that are only partially completed, especially those that had previously received approval from the National Development and Reform Commission. He said that, according to the practice in recent years, once a project receives approval from the **Development and Reform Commission, it means that the most difficult stage has been overcome, and all procedures, including environmental impact assessments, will be approved smoothly. Therefore, those projects that receive approval tend to make intensive efforts to accelerate the preliminary work. Taking the Pingliang Huahong Huijin Coal Chemical Project as an example, the total estimated investment for this project is 26 billion yuan. It is located in the Longdong **-level Energy and Chemical Industry Park in Pingliang City, Gansu Province, and is planned to produce 10 million tons of coal per year (with associated coal reserves of 1.3 billion tons), 1.8 million tons of methanol, 700,000 tons of olefins, 140,000 tons of EPDM rubber, as well as other fine chemical products. The project was officially launched in 2012, and received approval from the **National Development and Reform Commission in March 2013. Thanks to this crucial condition, businesses are full of confidence, and various preliminary tasks have been carried out at great speed. As of November 2015, the project’s safety assessment, energy assessment, and occupational health and safety evaluation reports, along with the requirements regarding coal usage, water consumption, and land use, had all been approved. Even a draft of the preliminary design was ready, and contracts for the procurement and manufacturing of some of the equipment with long lead times had been signed; construction could begin officially once the environmental impact assessment was approved. However, the introduction of the \"Access Requirements\" was like a bucket of cold water that drenched everyone in disappointment – because in the past, there were no clear guidelines regarding site selection and health protection distances; companies only needed to refer to the \"Health Protection Distances for Petrochemical Enterprises\" (which was at most 1.2 kilometers). The \"Access Requirements\" specifically state that those constructing coal-to-gas plants must, in addition to maintaining protective distances in accordance with ** and local regulations, also meet the requirements set out in the \"Health Protection Distances for Coal-to-Gas Industries\" (GB/T17222). This means that as long as the daily output of raw gas exceeds 500 tons, its health protection distance must be more than 4.4 kilometers. Working backwards in this way, the residents, schools, and hospitals in Siliupu Town, which is the closest to the Longdong **-level Energy and Chemical Industry Park where the Pingliang Huahong Huijin coal chemical project is located, will almost all need to be relocated. The total number of people who will need to move exceeds 10,000, which is 10 times more than before. For such a massive project, even the locals are unsure about it, let alone the companies, which are even less capable of handling it. Even assuming that one ultimately decides to carry out the smooth relocation of tens of thousands of residents, the project cost would increase by around 50%, making it entirely uneconomic. But if construction is abandoned, the 1.3 to 1.4 billion yuan already spent in the early stages will be wasted. Huahong Huijin Coal Chemical in Pingliang is by no means the only project troubled by the \"Access Requirements\". According to a statement from Shenhua Group, the Shenhua Baotou Phase II project, with an estimated total investment of 19 billion yuan and a production capacity of 700,000 tons per year of coal-based olefins, must adopt measures such as impermeable barriers, an expansion of the facility area, and the installation of advanced environmental protection equipment in order to meet the health and safety distance requirements as well as the goals of near-zero wastewater discharge specified in the regulatory requirements. As a result, the costs associated with environmental protection have risen sharply to 2.1 billion yuan, accounting for over 11% of the project’s total investment. According to Li Zhijian, assistant to the director of the Petroleum and Chemical Industry Planning Institute, the comprehensive utilization project for high-sulfur coal in Lu’an Changzhi has passed the environmental impact assessment after necessary revisions. Projects such as Su New Energy’s coal-to-natural gas project may also ultimately pass the environmental impact assessment after revisions, but the investment required for these projects will increase significantly. “As far as I know, the more than a dozen modern coal chemical projects that have received approval since 2013 required initial investments of at least 100 million yuan, with some requiring investments of over 1 billion yuan. Now, faced with the \"access requirements,\" at least half of the projects will find themselves in a difficult situation similar to that of the Pingliang Huahong Huijin Coal Chemical Project; the other half will need to invest an additional 500 million to 600 million yuan, or even over 1 billion yuan, in their projects. ”Wang Weifeng revealed to the reporters. Short-term industry investment is affected. Tang Hongqing, a technical advisor at Sinotech Synthetic Oil Technology Co., Ltd., said that since the \"Access Requirements\" were formulated specifically for modern coal chemical industries, they give the illusion that pollution and emissions in these industries are extremely severe. For example, the \"Access Requirements\" specifically emphasize that \"new modern coal chemical projects should be strictly controlled in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Pearl River Delta, and water-scarce areas.\" Given the poor air quality and frequent fog in the Beijing-Tianjin-Hebei region in recent years, there is a strong emphasis on restricting the establishment of new modern coal chemical projects in this area. It is natural to assume that it is precisely because modern coal chemistry exacerbates environmental pollution and foggy weather in this region that such restrictions are imposed. But this is not the case. Research conducted by numerous institutions shows that the main reasons for the increasing pollution and frequent fog occurrences in various regions, including the Beijing-Tianjin-Hebei area, are the irrational use of coal, especially its use for direct combustion ； The second is vehicle exhaust ； Third are the emissions from traditional sectors such as coking, steel, building materials, and electricity. Modern coal chemical industry not only causes less pollution but is also one of the effective ways for the clean and efficient utilization of coal. “As far as I know, many modern coal chemical enterprises, including Shaanxi Weihua Group and Inner Mongolia HuiNeng Coal Chemical Co., Ltd., thanks to their advanced process technologies and effective management practices, transport and use coal in a sealed manner, and all types of ’three wastes’ are properly treated or recycled. There is no sign of pollution such as dust at the site; they are simply garden-like factories. Factories like these are common in the modern coal chemical industry; some of them have even become models for energy conservation and environmental protection at the regional, industrial, and national levels. Traditional coal chemical processes, which are characterized by high pollution and high emissions, cannot be compared to them at all. However, after the release of the \"Access Requirements,\" it is highly likely to mislead the general public regarding the environmental protection and safety aspects of modern coal chemical industry, thereby having a negative impact on the development of this industry. ”Tang Hongqing said. You Xiti, the executive vice president of Shaanxi Coal and Chemical Industry Group Co., Ltd., said that in the past, the development of modern coal chemical projects was mainly focused on economic growth and coal resources. After the implementation of the \"Access Conditions,\" greater emphasis is placed on the environmental capacity and water resources of the location where the project is situated. This represents a **milestone-style change at the policy level; it also raises significantly the entry barriers and requirements for modern coal chemical industries, increasing the costs and difficulties associated with launching such projects. The requirements set out in the \"Access Conditions\" regarding water usage, energy consumption, process parameters, and wastewater treatment for modern coal chemical projects will undoubtedly increase enterprises’ upfront investments in environmental protection and emergency response measures. These changes and factors will force companies to be more cautious when investing in modern coal chemical projects, prompting them to reevaluate the economic viability and risks of existing and planned projects. In the short term, this will lead to a sharp decline in investment in modern coal chemistry as well as reduced spending on research and development, thereby imposing certain constraints on the development of this industry.