Luan 180 Project
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On August 28, 2016, the analysis and testing laboratory for the Shanxi Lu’an coal-to-oil project, constructed by Shaanxi Huajian No. 2 Company, was completed. By the deadline, the final rectification tasks related to the “three inspections and four determinations” for this project, undertaken by the company, have been largely completed. The additional design changes and the responsible persons for them have been identified, and efforts are now in full swing to get the project up and running. Located in Xiangyuan County, Changzhi City, Shanxi Province, this project utilizes local coal resources and employs technologies such as pressurized coal gasification and Fischer-Tropsch synthesis to produce 1.8 million tons per year of petroleum products and chemicals. The project is constructed in two phases: Phase 1 involves the construction of an iron-based FTO oil production facility with an annual capacity of 1 million tons, while Phase 2 involves the construction of a cobalt-based FTO wax processing facility with an annual capacity of 800,000 tons. On September 8, 2016, the signing ceremony for major projects of the 2016 (Taiyuan) International Forum on Low-Carbon Energy Development was held, during which Lu’an Group entered into cooperation agreements with two American companies. Li Jinping, Chairman and Party Secretary of Lu’an Group, and Bharat, General Manager of Chevron Corporation in the United States, signed a letter of intent on behalf of their respective parties for a partnership to produce high-quality lubricant base oils ； Li Weidong, chairman of Lu’an Group’s Coal-Based Clean Energy Company, and Jeffrey Stephen, Asia technical director of Air Products and Chemicals, signed a letter of intent for technical cooperation on behalf of their respective parties. Under the terms of the agreement, Lu’an Group will leverage its advantages in autonomous cobalt-based FTO synthesis technology, while Chevron will utilize its expertise in the deep processing of petroleum products. By complementing each other’s strengths, the two parties will work together to develop downstream products based on cobalt-based FTO synthesis technology. At the same time, Lu’an Group will also deepen its cooperation with Air Products to provide better technical services for Project 180, while actively exploring new cooperation opportunities.
The industry needs to move towards higher-end levels, and products should be oriented towards end-users. Reporter: What prompted Lu’an to propose developing a version 2.0 of coal-to-oil technology? Li Jinping: With international crude oil prices falling sharply and remaining at low levels, the previous development strategy that focused on oil has gradually lost its competitive advantage. To this end, drawing on the world’s leading coal liquefaction company for synthetic fuel production, Sasol of South Africa, we set a strategic transformation goal of \"using oil as a supplement while focusing on chemical production,\" and made strategic adjustments to \"strengthen competitive industries and withdraw from those that are less competitive,\" in order to achieve a development path that differs from that of petroleum-based products. Reduce the proportions of conventional stable light hydrocarbons, liquid paraffin, and urea, increase the production capacity of FTO wax, boost the output of high-quality base oils for lubricants, continue to develop products with high added value, and gradually increase the share of high-end, sophisticated products with high added value. Reporter: What technological breakthroughs has the “Taihang” lubricant achieved? Li Jinping: At present, our country is highly dependent on high-end lubricants. To produce high-end lubricants, Class IV PAO base oil must be used. PAO (poly-α-olefin) is obtained by polymerizing ethylene to produce α-olefins, which are then further processed through polymerization and hydrogenation. Currently, only five companies in the market possess this technology, and all of them are foreign firms; they do not transfer their technology. Meanwhile, our coal-to-oil products naturally contain alpha olefins, which, after hydropolymerization, yield PAO base oils of type IV. Lu’an Group is the world’s first company to produce III+ base oils and Class IV PAO base oils using coal as raw material. It will become Asia’s largest supplier of III+ base oils within two years. The “Taihang” lubricants, which are formulated from III+ base oils and PAO, are fully synthetic lubricants whose quality is on par with that of imported similar products. The profit margin on this lubricant is quite substantial. Not only in terms of lubricants, Lu’an Group is also the third company in the world – and the first in China – to use proprietary patented technology for the production of high-melting-point fischer-tropsch waxes, after Shell and Sasol. During the 13th Five-Year Plan period, it aims to become the world’s largest supplier of high-end waxes. It was the first company in China to utilize fischer-tropsch synthesis technology with independent intellectual property rights to transform methanol production facilities into ones capable of manufacturing high-end specialty chemicals, thus opening up a new path for using advanced technologies to drive the transformation and upgrading of traditional coal chemical industries. By employing its proprietary technologies, the company has produced high-quality isohexane solvent oils, breaking the monopoly held by international corporations and filling a gap in China’s market; its products have been included in the procurement lists of well-known domestic cosmetics and aerosol manufacturers. Reporter: We have noticed that homogenized competition in the domestic market for coal-based synthetic chemicals is quite severe. What suggestions do you have regarding this? Li Jinping: Based on the experiences of the Lu’an Group, I believe that the development of the industry focused on coal-based synthetic fine chemicals should emphasize differentiation, high-end quality, and internationalization, with an emphasis on the creation of new materials, new fuels, and new products. Highlight differentiation to foster the irreplaceable advantages of petroleum-based products; pursue high-end development by leveraging technological breakthroughs to drive industrial growth and product innovation; move toward internationalization, taking a path of leveraging strengths and achieving mutual benefit through openness. Taking our Lu’an company as an example, one ton of diesel produced can be sold for over 6,000 yuan per ton; high-end waxes and III+ base oils can be sold for over 10,000 yuan per ton, while lubricants can be sold for over 30,000 yuan per ton. The higher the level of sophistication, the greater the profit potential. That’s why I often say that industries should move towards higher-end products, with a focus on end-use applications – the more advanced the industry, the higher its added value, and the greater the profit potential. At the same time, this requires substantial investment in technology and support.
Reporter: In recent years, coal companies have been talking about transformation, but it seems that the transformation of many of these companies has not been successful. In fact, some of these transformation projects have become a heavy burden on the companies’ development. Could you share your views on the transformation of coal companies, drawing on Lu’an’s experiences? Li Jinping: I believe that such transformations should be driven by two types of awareness: a strong sense of crisis and a strong sense of innovation. A sense of crisis: for coal companies, failing to transform means waiting for death, while transforming improperly means seeking death. An innovative mindset is necessary; transformation requires the support of an innovative platform. During the process of selecting projects for transformation, we have observed a phenomenon: as long as a previous project is profitable, everyone rushes to get involved in it, which leads to an oversupply of products related to that project and losses for the companies participating in it. When starting a project, the first thing to consider is the platform – what kind of platform? An innovation platform. Only with the support of an innovative platform can this product and industry sustain themselves, achieve profitability, and remain competitive. Taking Lu’an Group as an example, we have established six innovation platforms focused on fine chemicals. These include a key laboratory for low-carbon conversion science and engineering in collaboration with the Shanghai Institute of Advanced Technology affiliated to the Chinese Academy of Sciences; a key laboratory for coal-based co-production in partnership with the Shanxi Institute of Coal Chemistry of the Chinese Academy of Sciences; a high-tech platform in cooperation with Sinocat Chemicals Co., Ltd.; a joint laboratory for advanced lubricant materials developed together with the Shanghai Institute of Advanced Technology; a research and development platform for high-density environmentally friendly fuel oils created in partnership with Tianjin University; and a platform for the integrated development of biochemistry and coal chemistry built in collaboration with Shanghai Kaisai Biotechnology Co., Ltd. These six platforms continuously support our industry, ensuring that our products remain of high standard and quality. Many companies, including those on the Fortune Global 500 list, certainly have technology platforms that are tailored to their products and industries. Technology is the primary driving force for progress; it is essential to establish innovative platforms, as this is an inevitable trend for future development.
Has this project already met the conditions for operation? I still haven’t seen any news about it going into operation! ! ! ! ! ! !
Construction is in its final stages; it’s not yet complete. It was reported a few days ago that the laboratory has been handed over, and operation is expected to begin by the end of the year or after the Spring Festival.
There will definitely be major news reports when it goes into operation, as this is after all a model project for the economic transformation and development of Shanxi Province, and it must be put into use under any circumstances.
On September 26, 2016, Li Jinping, Chairman and Party Secretary of Lu’an Group, Xiao Yaning, Deputy General Manager, together with Liu Haijun, President of Huisheng Company, held discussions on advancing the construction of the gasification unit area for the 1.8 million-ton high-sulfur coal clean utilization integrated oil, chemical, power, and heating demonstration project. During the discussion, Liu Haijun introduced the construction projects that Huisheng Company is currently working on at home and abroad, and provided a detailed update on the progress of the gasification plant construction. At present, the construction of the gasification unit area is nearing completion, with tasks such as hydrostatic testing and individual unit tests already finished. Huisheng Company is formulating winter insulation measures for the relevant equipment, as well as preparing for the commissioning of all the equipment next year. Liu Haijun said that Huisheng Company will strengthen communication with Lu’an, develop a scientific and reasonable plan for test runs, and make every effort to ensure that the test operations can be carried out on schedule next year.
On October 15, Li Jinping, Chairman and Party Secretary of Lu’an Group, along with Li Yongwang, General Manager of China Science Synthetic Oil Technology Company, held a discussion on the preparatory work prior to the commissioning of Project 180. During the discussion, Li Yongwang introduced the construction projects that Zhongke Synthetic Oil Technology Company is currently working on at home and abroad, and provided a detailed update on the progress of the construction of the FTO synthesis unit area for Project 180. At present, the construction of the FTO synthesis unit area is nearing completion, with tasks such as pipeline purging and individual unit testing already finished. The company is working on measures to keep the relevant equipment insulated in winter, as well as making preparations for testing the entire equipment next year. Li Yongwang said that in the next step, efforts will be made to strengthen communication with Lu’an, develop a scientific and reasonable plan for test operations, and go all out to ensure that the testing can begin on schedule next year.
Currently, diesel costs around 4,800 per ton, while the production of three types of base oils via FTO synthesis costs 11,200. Can the lubricant cost up to 30,000?
On October 27, 2016, Lu’an Group held a meeting to discuss the commissioning of the integrated demonstration project for the clean utilization of high-sulfur coal in oil, chemical, power, and heating applications. Li Jinping, You Hao, Wang Zhiqing, Xiao Yaning, Liu Bin, and Huang Wei, leaders of Lu’an Group, attended the meeting. Personnel in charge of project partnership companies such as AP, Tiansheng, Shengke, Zhongke, Huisheng, Chengdu General, and Sinochem Second Construction attended the meeting. Each branch office should reschedule the deadlines according to the plan, in order to lay a solid foundation for CITC’s operations next year
Why such concern? It’s a highly mature product – it has the necessary funds and personnel, and it functions normally; problems only arise if it doesn’t work.