report on applying coal gasification technology in china's coal chemical industry

Natural Sciences Sector,

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CN/2007/PI/H/1

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Preface

Although UNESCO has been operating a fellowship programme for a long time, there

have been problems found out within technological transference from the developed

to developing countries facilitated by the fellowship programme. For example, in

addition to the issue of brain-drain, the number of beneficiaries is relatively smaller,

and the costs are often high. Upon the strong request for overcoming these weaknesses

from the developing countries, UNESCO launched the UNESCO Chair Programme

in 1992. The uniqueness of this Programme is that the eminent specialists, professors

will formulate the UNESCO Chair in universities or institutions of higher education

in developing countries. This way of arrangement would enable many more people to

receive the benefit, which is cost efficient and also prevents the issue of brain-drain.

As a result, this programme has attracted great interests from the developing countries,

universities and donors. Today we have 613 UNESCO Chairs involving over 735

institutions in 125 countries.

In the same context, UNISPAR (University-Industry-Science Partnership) Programme

was launched in 1993 based on the idea that the cooperation between university and

industry can be a valuable contribution to sustainable development through the means

of education, research, and services. Unfortunately however, it is often the case in

developing countries that involvement of universities is not sufficient in the process of

industrialization, as well as the economic and social development of their countries.

The UNESCO/Shell chair is one such Chair established during May 2003 in China at

Institute of Coal Chemistry, Chinese Academy of Sciences with the funding support

from Shell China.

The UNESCO/Shell Chair promoted Chinese industries to understand the process

of advanced coal gasification technology by strengthening the partnership between

research institute, university, and industry, which in return, speeds up application of

the technology, and promotes social development through scientific interaction.

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UNESCO Office Beijing acknowledges the efforts of SHELL China in sponsoring

this chair activities and Institute of Coal Chemistry in carrying out the training and

outreach activities. Finally we would like to thank Center for Environmental Education

and Communications, State Environmental Protection Administration for their efforts

in carryout this research and compiling research report as this publication. Certainly

we believe that this publication will serve as bench mark document in the Chinese

Coal and Chemical Industry.

Yasuyuki Aoshima

Director and Representative

Ramasamy Jayakumar

Programme Specialist – Natural Sciences

UNESCO Office Beijing

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UNESCO/Shell Chair in

Coal Gasification Technology

Introduction to UNISPAR

UNISPAR (University-Industry-Science Partnership) programme was launched by

UNESCO in 1993 to promote university participation in the industrialization process

of the developing countries.

Professors from specialized engineering universities, researchers of public and private

institutes, engineers, and managers in industry and government officials are thus

involved themselves in the technological and socio-economic aspects of sustainable

industrial development that serves to protect the environment.

UNISPAR- building partnerships for the future.

Industrialization of a country will not take place without human resources development

and technology transfer. A university has three functions: education, research, and

services. However, in developing countries, engineering universities do not participate

sufficiently in the process of industrialization of their countries.

UNESCO believes that university-industry co-operation can be a valuable

contribution to the industrialization of developing countries. UNESCO's effort

is aimed at encouraging local universities to be more involved in the process of

industrialization and at attracting industry towards co-operation with universities and

research institutes.

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UNESCO/Shell Chair- Introduction

China is the largest country in the world in terms of coal production and consumption.

Based on the current economic growth, coal will continue to be the dominant energy

resource in China in the future. The consumption of coal, however, draws attention of

people to the effect of emission on the environment.

Coal gasification technology provides a clean and efficient way to utilize coal. Syngas

produced by high temperature and high pressure through coal gasification technology

could be used for electricity generation and the creation of raw materials for chemical

production, transportation of fuel, hydrogen and substitute for natural gas.

Currently, China is taking up this technology quickly. In order to further promote the

gasification technology, and to enable more industrial customers to understand the

procedures of gasification, as well as characteristics of syngas and requirements of raw

materials, explanation and technical support from experts are indispensable.

UNESCO/SHELL Chair in the field of Coal Gasification was instituted during May

2003, coordinated by UNESCO, sponsored by SHELL and implemented by ICC

(Institute of Coal Chemistry, Chinese Academy of Sciences).

UNISPAR (University-Industry-Science Partnership) is one of the schemes under

UNESCO Chair Programme. UNESCO Chairs aim at strengthening the engineering

science education and research & development work by promoting the cooperation

between educational organization and industry in networking and in information

dissemination. It contributes to facilitate the human resource development and

technology transfer for the sustainable development.

As one of the most famous petroleum and chemical companies, SHELL has financially

sponsored this chair. At the same time, SHELL has provided directions and technical

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support based on its advanced technologies and successful experiences in the field of

coal gasification in China.

ICC, being a special coal conversion research institute of CAS, took in charge of this

chair, and implemented well with its technical advantage, intellectual resources and

wide spread relationships.

The UNESCO/SHELL Chair promoted Chinese industries to understand the process

of advanced coal gasification technology by strengthening the partnership between

research institute, university, and industry, which in return, speeds up application of

the technology, and promotes social development through scientific interaction.

Center for Environmental Education and Communications, State Environmental

Protection Administration conducted the “Survey on Status of Applying the Coal

Gasification in China Coal Chemical Industry” in China as part of their National

Environmental Protection Bureau Propaganda Center.

Part 1

Survey on Status of Applying

Coal Chemical Gasification Technology

in China’s Coal Chemical Industry

Center for Environmental Education and Communications

State Environmental Protection Administration

February, 2007

Contents of Part 1

1 Project Introduction ···································································11 1.1 Investigation Plan ················································································· 11

1.2 Implementation of Investigation ······························································· 12

1.3 Results ······························································································ 13

1.4 Conclusions ························································································ 14

2 Introduction on Coal Gasification Technologies and Coal Chemical Industry ······14

3 Coal Chemical Industry in China ····················································16

4 Differentiation and Analyzer of Factor Affecting Coal Chemistry Industry Development ························18

5 Coal Gasification Technology in China ············································· 19 5.1 Coal Gasification Application and Development in China ·································· 19

5.2 Representative Coal Gasification Companies and Field in China ··························· 22

5.3 Coal to Olefin Industry in China ································································ 25

5.4 Industrial Policy ··················································································· 29

6 Challenges and Obstacles of Coal Gasification Development in China ········31 6.1 In Regard to Energy Security, Coal Gasification is the Inevitable Choice for China ······ 31

6.2 Promissing Market of Coal Gasification Technology in China ····························· 31

6.3 The Risk of Coal Gasification Technology····················································· 32

6.4 Domestic Coal Chemical Industry Enterprises Have Great Passion

for Coal Gasification Technology ································································ 33

6.5 Chinese Government Prohibit Blindly Development of Coal Gasification Technology · 34

7 Problems in Recollecting Surveys and Questionnaires ····························35

8 Suggestions for Surveys in the Future ···············································36

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Survey on Status of Applying Coal Chemical Gasification Technology in China’s Coal Chemical Industry

1 Project Introduction

This survey is to research the demand and current situation of applying coal gasification

technology in China's coal chemical industry. The servey is under UNESCO's University-

Industry-Science Partnership (UNISPAR) project and the gasification frame of UNESCO-

Shell Chair. Center for Environmental and Education & Communications(CEEC) is

responsible for carrying out this survey under UNESCO’s request.

The objective of this survey is to find out the application status of coal gasification

technology in china, especially in the field of coal chemical industry. The servey

covers a wild spectrume of aspects of coal gasification technology: application,

development, current market situation and industry policies. Futhermore, the survey

is to identify the key factors which have heavy influence on the coal industry and then

provide information on the opportunities and obstacles of applying coal gasification

thecnology in the field of coal chemical industry through analysis based on the results

of the survey. Another part of the survey refers to the downstream production of coal

gasification, including the following aspects: market investigation and forecasting.

The team carrying out the survey consists of Hou Xiangbin from Beijing Yanqing

Environmental Monitoring Centre and students from Peking University (Lv ming

of School of Earth and Space Sciences and Shi Xuan, Fan Yongsheng of College

of Environmental Sciences and Zhang Qiang of School of mathematical Sciences).

The survey was directed by Jia Feng from CEEC and Professor Zhang Shiqiu from

Environment College of Peking University and coordinated by Cui Dandan and

Mayufei from CEEC. Cui Dandan from CEEC of State Environmental Protection

Administration (SEPA) was in charge of project coordination.

1.1 Investigation Plan

This survey cover the following aspects, the status of current application of the coal

gasification technology in China and the market data of the downstrem products of

coal gasification technology such as naphtha, diesel oil, Kerosene, Paraffin, crude oil.

People carried out the survey have sound education background and are trained with

professional knowledge and research skills. In addition, they’re good at communication

and can work effectively under strong pressure.

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Report on Applying Coal Gasification Technology in China’s Coal Chemical Industry

This investigation employs a sample collection plan which contains the random

sampling and quantitative methods.

Random sampling focuses on important enterprises applying gasification technology.

Considering the fact that industries related to coal gasification technology are widespread

such as chemical industry, metallurgy industry, fuel industry etc., we decided to focus

our research on important coal chemical industry enterprises. Stratified sampling method

is employed. All sample spots are stratified first according to the region and the scale,

and then simple stochastic sampling method is used in each level.

Quantitative collection engaged technologists and a few enterprises. Additionally,

relevant data are collected through interviews.

1.2 Implementation of investigation

The investigation started in October, 2006. Before we faxed the questionnaires, we

contacted all our targets enterprises making sure that they all were applying coal

gasification at the time. We then delivered the questionnaires to them. As a follow up,

we called the enterprises that received our questionnaires so that we could receive the

questionnairs from them in time.The survey was conducted in the name of UNESCO

and CEEC of SEPA .

1.2.1 The Application Status of Coal Gasification Technology

Due to the small number of enterprises using the coal gasification technology, a

complete survey was conducted among all the enterprises that are using the coal

gasification technology while a sample survey is applied on those that are not using

coal gasification technology. However, information about some enterprises couldn’t be

collected before the survey began.

We divided our target enterprises into two groups, enterprises applying coal

gasification technology and enterprises not applying coal gasifcation technology.

To enterpries that are using coal gasification technology, two types of questionnairs

are accordingly distributed depending on whether the enterprises are using direct

liquefication technology or indirect liquefication technology. To those enterprises that

are not using coal gasification technology, questionnaires regarding to general coal

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chemical industry are distributed.

1.2.2 The Market Status of the Down-stream Products of Coal Liquefaction Technology

Objects to be investigated: the market status of naphtha, diesel oil, kerosene,

paraffin, base oil Currently, raw materials to produce these kinds of production are

crude oil, natural gas and coal. They are all very important natural resources. This

survey was carried out mainly in form of data collection from official statistical

material.

Please refer to the appendix 2 for the collected data and relevant analysis.

1.3 Results

1.3.1 Investigation on the Application Status of Coal Gasification Technology

In October, Researchers carrying out the survey began to call the top 100 enterprises

in the field of coal chemical industry in China before sending out the questionnaires.

However, after calling more than 40 enterprises, the researchers found out that

more than 90 percent of enterprises are either not planning to apply coal chemical

technology or too small to have production lines. Therefore, the selection of the

research targets were incorrect, hence, the first stage of investigation was terminated.

(Please refer to appendix 1 for the name list of investigated enterprises-.xls )

In the mid of November, the researchers investigated the main coal enterprises of each

province with the “Telephone Directory of China Coal System (2006-2007)” provided by

Editorial Committee of Telephone Directory of China Coal System. 71 enterprises were

investigated, among which 18 enterprises showed no interest in applying coal gasification

technology and 27 enterprises accepted investigation questionnaires while 26 enterprises

were either unreachable or not interested in participating in the survey. By 15th of January,

the deadline for returning the questionnaires, no questionnaires are returned.

Literature review includes national policy and article announced by enterprises and

government through media. The research team also had two in-depth interviews with Han

Tianzheng from Shell in China and Wang Yang from Institute of Coal Chemistry of China.

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1.3.2 Investigation on the Market Status of the Downstream Products of Coal Liquefaction Technology

The downstream products derived from Coal Liquefaction technology are all very

important raw materials. To assure the accuracy of data, data were collected from the

National Statistical Yearbook and other statistical data published on reliable industry

websites.

1.4 Conclusions

After analying of the literature review and questionnaires, to some extent we

understood the development history and application status of coal gasification

thecnology in China, particularly in the field of coal chemical industry. Results also

include market status and industry policies. Furthermore, the key factors affecting the

coal chemistry industry are identified as well as possible opportunities and obstacles

of coal gasification technology in China.

2 Introduction on Coal Gasification Technologies and Coal Chemical Industry

Coal gasification is a process that converts coal from a solid to a gaseous form through

catalyst. The gasified products can be used as fuels, as raw materials for chemical

products and for electricity generation.

Coal gasification has a history of nearly one hundred years in the industry. During the

development of the coal gasification technology, most of the early-stage gasified coal

was converted in a very unsustainable way through using large amount of raw material

under high pressure. It can lead to a serial of problems, such as ineffective utilization

of powdered coal resources with high energy consumption and small scale, and serious

environment pollution etc. Since 1960’s, the development of gasification technology

has made significant progress; particularly in 1970’s, governments and research

organizations worldwide have paid great attention to the stimulation of petroleum crisis

and the serious coal-burning environmental pollution: US successively proposed the

Cleaner Coal Technology Demonstration Plans (CCTP) and the Vision 21. Promoted

by some of these projects, a lot of advanced large-scale gasification technology

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completes the demonstration, such as Texaco, Destec, Shell, Prenflo, KRW. In the past

20 years, China has made remarkable improvement on Coal gasification research; Ash

Agglomerating Fluidized Bed Gasification has completed the industrial demonstration.

We finished the medium test of Entrained-flow Gasification of Coal Water Slurry

and Gasification in Coal Pressure Fixed-bed, because we changed the overseas’

technologies’ import (Texaco,The Lur2gi gasifier) to the local services’ development

and technology reformation(multi-spray nozzle technology). Thanks to the Shell and

the Prenflo, dry feed entrained flow coal gasification had a successful demonstration;

we started to do some research on the relevant technology.

The modern coal chemical industry can be divided into three industrialization levels.

The first level is the synthesis gas from coal-coal water slurries or dry coal dusts were

partially oxidized to the synthetic gas (CO+ H2), the gasification of coal water slurry in

China has already been industrialized. The second level is the synthetic gas processing,

which mainly includes three routes: synthesis of alcohol, hydrocarbon and other

carbon oxidized compound. Alcohol synthesis includes synthesis of the methylalcohol,

DlVlE, ethylalcohol and further synthesis of the glycol. The third level is a further

processing which mostly processes the methylalcohol and the downstream products of

the alkene. It is the pillar of the chemical industry.

Chart 1: coal utilization base on coal gasification

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China has abundant coal resources and is one of the few countries where coal is used as

primary energy resource. It has 550,000 square kilometers’ coal area, 5,596,563,000,000

tons of resources gross, 1,007,700,000,000 tons of resources inventory, 18% of

resources proved rate and 114,500,000,000 tons of economically surplus recoverable

reserves. The coal accounts for 94.3% in the proved fossil energy reserves, only 5.7%

for the petroleum natural gas. Therefore, “abundant coal and scarce oil and gas” is

our country’s fundamental realities. In the structure of energy consumption, the coal

continuously maintain about 70% proportion for a long time, and it still maintains a

dominant position in structure of the energy consumption in 21st century. At the same

time, the resources such as, the petroleum, the natural gas, and the coal are not only the

main energy sources, but also the primary raw materials of the industrial chemicals. It

will be a significant influence to the chemical industry. With the rapid development of

the social economy, there is a steady increase in the demands of energy resource and

chemical products. Moreover, the coal-chemical industry has an important place in our

country’s energy resources and the chemical industry.

The coal chemical industry in China plays a significant role in realizing the advantages

of the abundance of coal resources, supplementing the deficiency of the gas resource,

satisfying the demand of chemical products, making progress in the cleaner resource

for power generation in coal chemical industry and promoting the sustainable

economical development.

3 Coal Chemical Industry in China

The products of the coal chemical industry include coking, gasification, liquefaction

and calcium carbide. Coal chemical industry after twenty years’ development plays

a significant role in the chemical industry. Coal chemical industry’s output accounts

50% of the chemical industry's output (not including petroleum and petrifaction).

Coal chemical industry uses coal as the raw material to synthesize two basic products

(ammonia and methyl alcohol). In 2005, our country produced 232,820,000 tons of

coke, 8,950,000 tons of calcium carbide, 25,000,000 tons of coal system chemical

fertilizer (folds approximately purely), about 3,500,000 tons of methylalcohol. All of

these are on an advanced level worldwide.

In recent years, the coal chemical industry rapidly shows its advantages due to the

sharp increase of the international oil price. Therefore, the coal chemical industry has

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been widely developed across China. After the reform of the investment system in

July, 2004, investment projects do not need specail permission from the government

anymore. As a result, many coal chemical projects with different scales were initiated

in coal mining area all over the country.

However, the development of the coal chemical industry has also aroused some

problems, particularly the tendency of the surplus production surplus in the traditional

coal chemical industry:

According to the statistics from National Development and Planning Commission, the

productivity of the traditional coal chemical industry is in serious surplus. At the end

of 2005, calcium carbide’s productivity is twice more than calcium carbide's products

that year. Coke’s productivity was so high that it was seven billion tons more than

the market demands. The gross of calcium carbide and coke raised 33.9% and 24.2%

separately over five months from January to may in 2006.

Driven by the increase of the petroleum price and High-level Economic Operation,

there was a tendency of blindly developing the oil alternatives such as, coal basis

methanol and aether. In 2005, there was 5,360,000 tons of the methanol’s output.

According to the incomplete statistics, the existing scale of methanol is almost about

9,000,000 tons; the planning productivity under was more than millions of tons.

In July 2006, National Development and Planning Commission (NDPC) announced

the “Notice on Strengthening of Coal Chemical Industry Projects to Promote the

Healthy Development of the Industry”（NDPCI[2006]1350）which has adjusted the

development of the coal gasification and liquefaction industry.

The "Notice" pointed out that the surplus production exists in the coal chemical

industry, while some places tend to blindly plan and construct the project without

considering the resources, ecology, and the environment.

The development of the coal chemical industry sets a high demands on a variet of

things such as resources, ecology, environment, technology, funding and the social

context. Therefore, the notice indicates that “for coal liquefaction industry, investment

department on all levels are not eligible to approve any projects before accomplishing

the National Development Plan for coal liquefaction.” Another crucial regulation is:

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“the projects (the ‘coal to oil’ project with less than 3,000,000 tons of annual output,

the coal basis methanol and the aether project with less than 1,000,000 tons and the

coal basis alkenes less than 600,000 ton) should not be approved by the relevant

departments throughout the country.”

Based on the analysis of these documents from NDPC, the government is still being

careful in promoting coal gasification technology. However, because of the advantages of

coal gasification thecnology, the government highly encourages the development of coal

chemical industry although it have carried out a serials of restrictions: “On the orientation

of the domestic fuel and the oil market, the government supports the areas, which have

enough advantages to establish large production bases of the methanol and the aether,

and have a good performance in test of using fuels and demonstration work. Besides, it is

also required to steadily advance the industrialization test and demonstrations, speeds up

the industrialization of the coal basis oil and the alkenes, construct a large-scale project

of the coal basis oil and the alkenes at an appropriate time.”

Obviously, the present coal gasification industry is facing both opportunities and

challenges. The government on one hand raises the requirement preventing small

and medium enterprises from entering the market; on the other hand, it clearly shows

encouragement to those large-scale enterprises, which are capable to apply coal

gasification technology.

4 Differentiation and Analyzer of Factor Affecting Coal Chemistry Industry Development

The coal chemical industry plays a crutial role in national development, however, it

also exerts critical requirements on the economic context, natural resources, ecological

system, environment, technology, and funding. As a result, to predict the trend of coal

chemical industry development is complicated and challengying.

● Energy safety

China, rich in coal, is one of the a few countries which uses coal as main energy

source. The general energy situation in China is abundancy in coal yet deficiency

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in oil and natural gas. Chinese petrol demands highly depend on import. In regard

of securing the energy resource, coal, as a substitute of petrol, used as a main raw

material, will alleviate the stress on petrol.

● Environmental protection

The massive and unsustainable usage of coal resources has caused dramatic damage to

the environment in China. As the Chinese government has announced a serial of strict

policies to control emission. The usage of coal resource will certainly become more

efficient and environmentally friendly. However, the requiremnt of energy efficiency,

environmental policies and the strict standard of emission might generate difficulties

for the development of coal industry.

● Society and economic

Since coal chemical industry heavily depends on coal and water resource, ecology,

environment, technology, capital and society, high risk exists. The development of

coal industry relates to the upstream raw material and downstream demands. The

factors that are closely related to the development of coal idustry also include the cost,

international base-oil price and coal price.

● Industrial Structure and policy

As mentioned above, coal industry which relates to nation economy would be adjusted

by the macro-control policies according to the national economic development.

National macro-control policies hold the balance of coal industry. To assure the safety

of investment and rational allocation of resources, the government makes policies to

regulate industry development including investment and resources allocation.

5 Coal Gasification Technology in China

5.1 Coal Gasification Application and Development in China

CGT has been used in China for nearly 100 years, but it lagged far behind. There are more

than 10,000 coal gasification stoves functioning in china, among them fixed-bed gasifier

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was the most common one. For example, in ammonia-fertilizer industries, the number of

UGI water-coal gasifier exceeds 4000 UGI; more than 5000 gasifiers including two phases

gasifier and Lurgi gasifier are used for producing industrial fuel gas.

Most advanced gasification technologies such as Winkler, U-GAS fluid bed and

Texaco entrained bed gasifier are used in fertilizer industries, but their number is

limited. Traditional technologies still take the biggest part of China’s gasification

technologies. If many problems such as old technology, lacking environmental

protection facilities, unefficient coal utilizing can not be solved, the harmonized

development of economy, energy and environment will not be achieved.

In the last 40 years, supported by the government, China achieved great progress

in research and developing CGT. Some outstanding examples marked milestone

in the field of coal chemical industry: The first one is the research of imitated K-T

gasification technology. The technology was tested in middle scale between mid 1960s

to late 1970s in Xinjiang Lucaogou and Shandong Huangxian, which provided ample

experience for developing texaco coal water gasification technology; In 1980s, people

did much work on ash agglomerating fluidized bed coal gasification technology, and

the technology was registered as a patent; In ninth “5 year plan”, Opposed Multi-

Nozzles entrained bed gasifier was developed and passed middle scale （22～24t

coal/d）test, the result showed that compared with Texaco technology, the technology

is better in carbon conversion rate, coal consumptions and oxygen consumptions, the

technology was also patented; In ninth “5 year plan”, the key technology of Integrated

Gasification Combined Cycle (IGCC) was set up as a program, which more than 10

institutions attended in. In addition, a lot of research was done in the field of science

and engineering such as fluid bed (including circulation), combustion of coal and

coal slurry, two phases fluxion and mix, heat conduction, substance conduction, coal

chemistry, gasified reaction, coal rock configuration, coal grinding and desiccation,

high temperature gas cleaning.

Furthermore, China also cooperates with foreign CGT holders actively and introduceds a

lot of advanced CGT technologies, such as Texaco coal-water slurry technology, Shell

Dry Coal Dust Gasification Technique and GSP Dry Coal Dust Gasification Technique.

In the following text, the application of these technologies will be discussed:

Texaco coal-water slurry CGT. The technology was invented by American Texaco

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Corp (bought by GE.). In 1984, Shandong Lunan fertilizer factory introduced Taxaco

CGT, and built the first set of Texaco coal-water slurry equipment in China, it was

put into production in 1993.Then Shanghai Coke Plant, Shanxi Weihe coal chemical

group, Anhui Huainan Chemical Plant, Haolianghe fertilizer factory and Sinopec

Jinling Petrochemical Corporation all introduced Texaco technology successively.

This technology has been used in china for many years, with ample experience and

mature technology. The main equipment required by this technology could all be

produced locally; only burners and coal slurry pumps need to be imported. As Texaco

gasification technology is well developed in china, the process of producing, installing

the equipment and the equipment's functioning is very efficient.Therefore, the

production objective could be promptly met.

The representative companies that use Texaco gasification technology are shown in

Table 1.

Shell dry coal dust gasification technology. This technology was invented by Shell.

Now there have been 15 projects in China that are under construction or will be

constructed, one of them is situated in Hubei shuanghuan that was put into production

in 2006.

As an environmentally friendly technology, Shell technology could adapt to a variety

of coal, with high efficiency. However, it has not been widely localized; the main

equipment such as the gasifier inner parts still heavily depends on import, therefore it

requires larger investment.

As most of projects with Shell technology are under construction, there is not sufficient

operation experience available. The representative companies that use this technology

are provided in Table 1.

Future energy GSP dry coal dust gasification technology. This technology was initially

invented by Democratic Germany, now it belongs to Germany Future Energy company

GmbHF. There are 5 projects in China with this technology under construction, Facing

the same problem as shell, the projects lack operation experience and and not stable.

But GSP also has many advantages such as adaptive to different coal, high carbon

transform ratio, low pollution and so on, which gives it a promising future.

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5.2 Representative Coal Gasification Companies and Field in China

Table 1: Representative coal gasification companies in China

province company CGT scalePut into

production

Shanxi

Shanxi Luan Mining Group Company

Ash Agglomerating Fluidized Bed Coal

Gasification Technology 160kt

Jincheng Anthracite Mining Group

Ash Agglomerating Fluidized Bed Coal

Gasification Technology100kt 2008

Lunan Chemical Fertilizer Factory

Texaco coal-water slurry CGT

1993

Yankuang Cathay Coal Chemicals Co., Ltd.

coal-water slurry gasification with

opposed multi-burner240kt methanol 2005.10

Shandong Hualu Hengsheng Group Co., Ltd

coal-water slurry gasification with

opposed multi-burner2005.6

Inner Mongolia Yitai Coal Group Company Limited

coal-water slurry gasification technology

160kt 2008

Shenhua group, Baotou UOP MTO technology1800kt methanol and 600kt down stream products

Shenhua group，OrdosShell Dry Coal Dust

Gasification Technique5000kt oil products 2008

China National Coal Group Corp.,Sinopec，Ordos

4200kt methanol、3000kt Dimethyl

ether2010

Shenhua Ningxia Coal Industry Group

Shell CTL technology 3500kt


GSP entrained flow CGT830kt Dimethyl

ether2008


GSP entrained flow CGT

Polypropylene 520kt，gasoline 156.2kt, liquid

fuel 64.5kt

2008

Shenhua Ningxia Coal Industry Group，Yinchuan

Lurgi MTP technology 540kt propylene 2009

Shandong

Inner Mongolia

Ningxia

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Yankuang group, Yulin Low temperature F-T technology

1000kt 2008

Shenhua group, Yulin Sasol F-T technology 3000kt

Shanxi Weihe coal chemical group


1996

Shenmu chemical industry Co.Ltd.


200kt methanol 2005

Xinjiang Shenhua group，Heishan

Hubei Shuanghuan Chemical Group Ltd

Shell Dry Coal Dust Gasification Technique

200kt synthetic ammonia

2006.5.7

Sinopec Hubei Fertilizer Subsidiary


synthetic ammonia 396 kt，570kt urea

2008

Sinopec Dongting nitrogenous fertilizer plant


435.6kt synthetic ammonia

2004

Sinopec Jinling PecTexaco coal-water

slurry CGT300kt 2005.5.28

Hunan

Sinopec Balin subsidiaryShell Dry Coal Dust

Gasification Technique2006.3

Yueyang Sinopec & Shell Coal Gasification Co., Ltd


600kt urea 2003

Anhui

Sinopec Anqing subsidiaryShell Dry Coal Dust

Gasification Technique300kt synthetic

ammonia2006

Anhui Huainan Chemical Plant


2000

Anhui Huainan Chemical Group Co.,Ltd

GSP entrained flow CGT300kt synthetic

ammonia

Shanghai Shanghai Coke PlantTexaco coal-water

slurry CGT200kt methanol，

coal gas 1300km3/d1995

Tianjin

Tianjin Bohai Chemical Industry Group Corp.


Tianjin Soda PlantAsh Agglomerating Fluidized Bed Coal

Gasification Technology

80kt synthetic ammonia

2005.7

Shanxi

Hubei

2�


Pingdingshan Coal Co.Ltd 500kt Called off

Zhongyuan Fertilizer Group Corp.


300kt methanol 2007

Yongcheng Coal - electricity Group


800kt methanol 2006

Henan Kaixiang Electric Power Industry Co., Ltd.


500kt methanol 2007

Yima Gasification Factory, Henan Coal Group

Lurgi CGTCoal gas 120Nm

3/d

methanol 80kt2006.8.12

JiangsuJiangsu Lingguo Chemical Co.,Ltd


ammonia2008

GuangxiLiuzhou Chemical Industry Co., Ltd


300kt urea 2006.12

Yunnan

Yunnan Tianan Chemical Co.Ltd.


500kt synthetic ammonia，1200kt Monoammonium

phosphate

2006

Yunnan Zhanhua Co.,Ltd.Shell Dry Coal Dust

Gasification Technique500kt synthetic

ammonia2006

GuizhouYankuang Energy

Chemical Co., Ltd, Guizhou


ammonia

HeilongjiangHaolianghe Fertilizer

FacotoryTexaco coal-water

slurry CGT100kt synthetic

ammonia2004

LiaoningDalian Chemical Industry Co.,Ltd


JilinJilin fertilizer and pesticide group

Ende Coal Gasification

synthetic ammonia 80kt，urea 130kt，

urban coal gas 24 million m3

2006.11

Henan

2�


5.3 Coal to Olefin Industry in China

Within the framwork of UNESCO/Shell Chair, we did survey on projects which used

coal to produce alkenes, the highlight of coal gasification technology.

The persistent increase of international oil price and the shortage of oil resources in

china has long been the bottle neck of its economic growth, therefore to seek new

source of Olefin products is crucial for the development of China.

China has abundant coal resources. The reserve volume is over 1,000 billion tons,

which is the basis for coal-based chemical industries. With the development of modern

coal chemical technologies, it is easier to make ethane and propylene through coal-

based methanol; In addition, its relatively low price campared to the price of oil

ensures this technology ensured the profit of coal gasfication technology.

The start of Shenhua Group MTO (Coal to Olefin) projects could meet the demand

of China’s energy and heavy chemical industries. It gives a new way to alleviate the

shortage of oil energy, and sets up a pattern how to extend coal industry chain and

realize coal industry sustainable development.

Except the way how heat conducts, MTO (methanol to olefin) technology is very similar

as catalytic cracking technology which is a mature technology in oil refining industry,

and it demands less on operation conditions. As MTO could share the experience of

catalytic cracking facility designing and operation, it bears very small risk.

Two provinces, Inner Mongolia and Shanxi, become the hotspots for investigation as

they have rich coal resources. Shenhua Group, the biggest coal producer in China, has

begun to build coal-to-olefin (CTO) projects. One of them is to invest 15 billion RMB

to build a plant where coal is to be turned into methanol and then to supply MTO

facilities, this project is the first CTO project in China. Hong Kong Kerry Group and

Baotou Tomorrow Technology Company are another two investors.

Shen hua Group also cooperated with Dow to consider building one CTO factory in

Yulin, Shanxi province.

The world’s first Coal-to-olefin project- Shenhua Group CTO project was founded in

2�


late October, 2005 in Baotou, inner Mongolia. The factory's situated in a newly planned

industrial base in Halinger county, Jiuyuan district, Baotou city. The whole engineering

installed 1800kt/y coal-to-methanol, 600kt/y MTO, 310kt/y polypropylene and 300kt/y

polythene facilities, with a 224 km3 O2/h air-separation facility. The project consumes 3450kt

coking coal and 1280kt steam coal. The key technology will be MTO technology from

Universal Oil Products Company (UOP), the total investment will be 12.4 billion RMB. It is

planned in 2020, the productivity will increase to 30000kt/y CTO and 3000kt/y CTM.

Amec company has joined in a CTO program which was invested 1.5 billion dollars

by one of Shenhua Group’s subsidiary- Ningxia Coal industry Group. The installation

will include coal gasification facility, methanol and methanol-to-propylene (MTP)

facilities, and 540kt/y polypropylene facility. The program started from Match, 2006,

and will be built up in 2009. Qilu company will provide MTP the technology to build

a methanol-to-propylene (MTP) facility, which is composed of 5kt/d methanol facility

and 471kt/y propylene facility. This is the second industrialized MTP facility built by

Qilu Company after that for Iran Fanavaran Company in Bandar Imam.

In Yulin, Shannxi province, Hong Kong Benefit Sales Company and Chemical

Engineering Construction Company of China (TCC) cooperated to set up a CTO

company, which is one of three programs Shanxi government supported. Shanxi

Investment group built a MTO test facility using the technology from Dalin Institute

of Chemical Physics, Chinese Academy of Sciences. In these projects, Ningxia Baota

chemical group planned to produce methanol and other olefin, which would increase

its methanol productivity from 600kt/y to 2600kt/y, with 500kt/y olefin byproduct.

On 28th December, 2005, Guizhou Tianfu Chemical Co. Ltd. founded its 300kt/y

ammonia and 150kt/y DEM program which uses clean coal technology. The company

is working hard to build up a 1600kt/y methanol and polyolefin program by the end of

the 11th five-year plan.

In addition, Changzhi Tianji coal chemical industry company has got the permission to

build a 600kt/y methanol equipment in Changzhi, which will be finished by the end of

2007. The company also considers of building a DEM facility. Pingliang Huating coal

group plans to build a 600kt/y methanol equipment, and 300kt/y PP equipment, the

two sets of equipment would be put into production in 2008.

Xinao company in Langfang Heibei will build a 1800kt/y coal based methanol factory

2�


located in inner Mongolia. The company is also building 600kt/y methanol and 400kt/y

DEM facilities which will be finished by the end 2007.

Dow chemical company will do research on Chinese coal based chemical companies.

The company signed a contract with Shenhua Group in 2005 to cooperate on large-

scale CTO program research.

The study will find the most suitable technology and the most economical product

capacity for the program. These two companies agreed that the best building site could

be near Yulin. What attracted Dow most is the advantage of raw material, China has

abundant coal in rural area just as Middle East owns low-price ethane. The company

has done pre-research on coal-to-gas, then gas-to-olefin programs in China, the whole

study was completed by the end of 2006.

A consultant company SRI which is situated in America believes that, in China coal

is a resource to produce fertilizer and other chemical products, it helps to fill the trade

gaps of chemical products. However, in America, the coal is currently mainly used to

generate electricity, for other byproducts, especially acetyl products there exist many

opportunities.

Some Chinese chemical products companies also consider building gasifiers as a

way to reduce the dependence on imported raw materials. Sinopec has just signed an

agreement which allows Shandong Qilu Subsidiary use GE technology to produce

synthesized gas from coal and oil coke. Qilu facilities will be the 4th facility in China

with GE technology. Before that, Sinopec Zhenhai company signed an agreement in

1978, and Jilin company and Nanjing company signed another two in 2002 and 2003

respectively. According to GE energy company, most of their gasification technology

agreements go to China. Since the company purchased gasification technology from

Chevron Texaco Corp. in 2004, it has got 5 contracts. China continues to suffer the

stress of natural gas shortage, so it is now looking into using coal to generate electricity

and produce chemical products as an alternative plan.

The 300kt/y synthetic ammonia and 520kt/y carbamide coal-water slurry program

of Sinopec Jinling subsidiary was launched in May, 2005, which symbolized the

completion of Jinling subsidiary’s oil refine-chemical optimizing and fertilize raw

material technical transformation program. This is Sinopec’s first program using CGT

to produce hydrogen and synthetic ammonia.

28


The Jinling program planned using coal and oil coke as raw materials to reach a

product capacity of 300kt/y synthetic ammonia, 52kt/y carbamide and 30kt/y hydrogen

with Texaco water-coal slurry technology. The program was launched cooperatively

by China Tianchen Chemical Engineering Company and Jinling subsidiary of Sinopec.

It only lasted less than 2 years from beginning in October, 18th, 2003 to successfully

running in late September, 2005, which is the first one of 4 CTO programs belonging

to Sinopec. The gasifier of this program had a diameter of 3.2 meters with 1200 tons

coal input, which is the world’s largest Taxco gasifier.

According to the coal price paid by the factory, if the load was 75% (1100t/d synthetic

ammonia), the annual revenue would be 150~200 million RMB, which would cut

down cost by 500 million RMB. Considering the run-in condition, it takes less than

one day from the gasifier ignition to output of qualified hydrogen and synthetic

ammonia, which is much simpler and easier to operation than the previous naphtha-to-

hydrogen method.

The significance of this program lies not only in the reduction of synthetic ammonia

cost, but also on the realizing of resource optimizing. In the past, all of Sinopec oil

refinery use naphtha to produce hydrogen to supply hydrogenation facility. One

10million tons scale refinery plant which machining imported sulfur-contained crude

oil needs 100 tons hydrogen every year. If hydrogen could be produced by coal-water

slurry facility, the cost will be 300 million RMB lower, thus the technology is suitable

to reduce the cost of machining imported high-sulfer crude oil.

Celanese (Nanjing) Chemical Co., Ltd. will build a 600kt/y acetic acid program in

Nanjing chemical industry park. Celanese signed a contract with Wilson (Nanjing)

chemical company about long term supply of acetic acid raw material. Wilson company

would use clean coal technology to produce CO and methanol. The CO/methanol

facility will be built up in late 2006 to early 2007. Wilson (Nanjing) chemical company

and GE energy company signed a coal gasification technology cession about building

three 450 cube inch gasifiers among which one is used as a back up equipment.

In March, 2006, Shell Research Limited and Tianjin Bohai Chemical Industry Group

signed an agreement of clean coal gasification technology agreement, this is the 14th

technology cession project of Shell since it entered China in 2001.Tianjin Bohai

Chemical Industry Group would use this technology to build one gasifier in Tianjin

Lingang industrial park. The coal gas will then be transformed to ammonia, methanol

29


and buty1-octy1 alcohol. Before that, Shell technology has been introduced to more

than 13 companies situated in Hubei, Hennan, Guangxi, Yunnan, Liaoning, Ningxia

and Anhui province. 7 of these companies

It is said that the first coal gasification project transferred by Shell to Sinopec Hunan

Balin fertilizer company coal-to-oil project was started in 2001, and was then put into

production in 2006.3. Sinopec Hubei fertilizer subsidiary and Anhui Anqing subsidiary

coal-to-oil projects have entered the test phase, and other projects also runs smoothly.

5.4 Industrial Policy

As a clean coal technology and an important part of national energy sources strategy,

coal gasification has been supported by the government. In the last ten years, the

government put forward a series of policies to support the development of coal

gasification industry.

In 1997 the State Council issued “The Ninth Five-Year Plan for Chinese Clean Coal

Technology and the Compendium of 2010 Development”. Other laws, regulations

and important policies involving clean coal technology include “The Coal Law of the

People’s Republic of China”, “The Energy-Conservation Law of the People’s Republic

of China”, “The Law of Air-Pollution Prevention of the People’s Republic of China”,

and the “Chinese Compendium of Energy-Conservation Policies”. According to

“The Guide for Prior Developing Fields of the Industrialization of High-Technology

(Catalog)”, the government will develop and promote the clean coal technology, and

will regulate the processes of clean coal techniques.

In “The Agenda for the 21st Century of China”, the clean coal technology is placed as

a crucial part of important measures for Chinese sustainable development strategy.

In 1999, the Central Committee and the State Council held the National Conference

of Technology Innovation. On the conference, it states that clean coal technology is an

important part of the development of clean energy resources technology and industry.

However, at the same time the government was to some extent worried about the

development of coal chemical industry. In the document of “The Announcement about

Reinforcing the Management of Coal Chemical Industry and Improving the Development

of this Industry” (No. [2006]1350 on National Development and Reform Committee),

�0


there was a signal that the government was concerned especially on some large scale

development such as coal-to-carbinol, and coal-to-dimethl ether program, coal-to-olefin

program, and coal-to-oil program. According to the investment by large enterprises, the

government hoped to testify their worries about technology, resources, accessories and

other aspects of coal-to-oil industry, and at the same time to avoid negative competition

and financial waste caused by careless action without proper assessment.

After the document was issued, except the constructing of coal-to-oil programs in

Shenhua Group, Shandong Yankuang Group and Shanxi Lu’an Group, domestic

interest in coal-to-oil projects were restrained to a large extent.

As the leading programmes of coal-to-oil industry, the major programs of Shanhua are

not affected at all. Shenhua Erdos coal-to-oil programs have a productivity of 5 million

tons/year, which are divided into two stages of construction. The first-stage construction

has a productivity of 3.20 million tons/year, and the major equipments are set. In 2007

the whole construction can be finished and put into production. Shenhua Baotou coal-

to-olefin program has a construction of 1.80 million tons/year; coal-to-carbinol is

600,000 tons/year. On the other hand, some small-scaled program is facing grounding

and adjustment. According to surveys, shortly after the document, Xindazhou Corp.

put forwarded a statement, saying that the company stopped the negotiation about coal-

carbinol program; Hubei Baike Medical Corp. put forwarded an announcement, saying

they got the record identification for fuel dimethl ether at 1 million tons/year, compared

with the formerly announced construction scale of 100,000 tons.

Sichuan Meifeng Chemical Corp. purchased Liujiaxia Chemical Principal Factory in

the first half of 2006 in order to enter the coal chemical industry. Liujiaxia has a coal-to-

carbinol program of 70,000 tons/year, and has the expectation of enhancement. This time,

the “Announcement” makes Meifeng change its mind. They will not consider building a

large program on carbinol, but shift to programs which can bring Meifeng’s advantages.

Coal Industry Bureau of Yunnan Province says that Xianfeng coal-to-oil program has

not received the order to stop. However, since it cannot solve the problem of billions

of financial demand, it makes no progress so far. Xianfeng coal-to-oil program plans a

productivity of 1 million tons. If it is required to reach the scale of 3 million tons, the

prophase operation will be wasted. The 3 million tons productivity demands the raw

material support from a mine which can produce coal of 10 million tons. But it remains

doubt whether Xianfeng Mine have such production scale.

�1


Shanxi Xinghua Group originally planned to invest 0.6 billion to initiate a 150,000

tons/year carbinol program; Heilongjiang Yilan had a direct coal liquefaction program.

Both of them is to pile up.

6 Challenges and Obstacles of Coal Gasification Development in China

6.1 In Regard to Energy Security, Coal Gasification is the Inevitable Choice for China

Abundant coal alongside scarce oil and gas is the fundamental natural resource

reality of our country. In our country, Coal is widely acllocated among 550,000 square

kilometeres. Total coal resources sum to 5,596,563 million tons, the quantity of retained

resource is 1,007,700 million tons, the verified rate is 18%, and economical potential

surplus reserves are 114,500 million tons. In the verified fossil energy reserves of

the world, China’s coal accounts for 15% of the world total quantity, the petroleum

accounts for 2.7%, and the natural gas accounts for 0.9%. In the total fossil energy

of China (approximately 46,000 billion tons of standard coal), 95.6% is coal, 3.2% is

petroleum, and 1.2% is natural gas.

According to the statistics, the total energy consumption of China in 2005 reached 2.11

billion tons of standard coal, among which coal accounts for 68%, petroleum accounts

for 23.45%, natural gas accounts for 3%, hydropower and nuclear power altogether

accounts for 5.45%. Based on the national energy situation, coal chemical industry

that takes the coal as raw material has a pivotal strategic significance to our country’s

development.

China's coal chemical industries could bring the advantages of abundant coal resources

into play, make up for the insufficiency of domestic oil and gas resources, satisfy the

demand for chemical products, impel the development of coal chemical industry with

pure electric power, safeguard energy security, and facilitate the economic sustainable

development.

6.2 Promissing Market of Coal Gasification Technology in China

The quantity of SO2 emission of china was the biggest. Acid rain covers 30% of the

�2


area of whole country; the CO2 emission of China takes up 13% of the world's total CO2

emission, the second largest country of emission. Among the emissions, SO2’s, CO2’s, NOx’s

emission from coal resources was 85%, 85%, 60% of the whole emissions respectively.

Before 2010, china will still give off SO2 27.5 to 35.6 million tons per year when

research shows the environmental carrying capability is 12 million tons.

China is facing a great challenge in energy consumption structure that energy

mainly comes from coal. It is urgent to solve the environment pollution induced

by the extensive use of coal. Coal gasification technology can reduce the emission

dramatically due to using coal effectively. In this way, Coal gasification used in

chemistry and electric power field can prevent the emission.

6.3 The Risk of Coal Gasification Technology

There exists high risk in the coal chemical industries. First, the threshold is high,

because coal chemical industry projects require plenty of coal resources and water

resources and also consume a lot of other resources, which means they don’t suit

in the west part where water lacks. Additionally, producing 10,000 tons of oil need

investments about 100,000,000 Yuan, which can only be undertaken by big enterprises.

Therefore, although many countries have introduced the technology, only South Africa

did the true investment on the industrial production.

Second, there exist risks in profit making. We can see from the investigation results

that, from approving and initiating the coal liquefaction industrial projects to beginning

production, it usually takes 5 years. Though nowadays the oil price is high, the price

in 5 years is hard to predict because many factors affect the international oil price and

the rather huge fluctuation of oil price. Besides, coal-liquefaction faces the risk of

domestic coal market price fluctuation. During these years, the domestic pithead price

of coal rises from 20 or 30 Yuan to 240 Yuan, which is nearly 10 times higher than

before, and it’s not possible for the price to go down to the original low level, and this

will bring pressures on the coal-liquefaction projects.

Therefore, as to the recently emerging crush on coal-liquefaction, besides the economic

interest, some motives in other respects play very important roles. The hyping about

coal-liquefaction in some parts of western area far surpasses the actual need of the

coal chemical industry development. Some enterprises knew perfectly well that the

possibility of starting up projects is extremely low, but they still seize and occupy the

��


resources in the name of coal-liquefaction, whose actual goal is mining. In some areas,

coal chemical industries just started, but the existing coal resources are almost carved

up. Coal-liquefaction rush headlong into mass action in every place, which perhaps

will create a new term of resource wasting.

6.4 Domestic Coal Chemical Industry Enterprises Have Great Passion for Coal Gasification Technology

Coal chemical industries that take the coal as raw materials are going popular during

a short time of years. Numbers of coal chemical projects to be started or newly started

are growing more in the whole country, and the scales of the projects range wide.

Furthermore, non-chemical enterprises, electric power enterprises, coal enterprises

also invest in the coal chemical industry projects one after another depending on their

resource advantages, and besides Shenhua Group, nearly all provinces and cities in

China which produce coal are incubating “the coal-derived oil” projects of different

scales. In Shaanxi, the projects about coal derived methylalcohol and coal derived

alkene are running with the possibility of 19.3 billion Yuan worth investment. Person

who’s in charge of attracting investments in the Project Office of Development

and Reform Commission of Yulin City said that,the coal derived methylalcohol

project hasn’t started yet, and the joint venture and cooperation matters are being

discussed with several companies currently; as for the coal derived alkene project, the

preparatory work is being undertaken in Shenmu and Hengshan subordinate to Yulin

City at present.

In Shanxi Province, Tunliu coal mine of Lu’an Mining Group which is under

construction claimed the biggest derricks in the world, and its main shaft derricks

folded just a week ago. But the most advanced mine in the world isn’t restricted to the

traditional coal digging and selling. According to the plan, Tunliu coal mine will build

up a coal-derived oil demonstration plant whose annual production is 160,000 tons, and

if the experiment makes good winning, a coal-derived oil plant with annual output of 5.2

million tons will be built up. Not only that, Shanxi Province has listed coal liquefaction

into its development plan and it planed to build up a super large enterprise group with

the core of million-ton-class coal-synthesized oil within 5 to 10 years among those big

coalfields in Shuozhou and Datong, due to its rich coal reserve volume.

In Shandong Province, the biggest coal producing enterprise, Yankuang Group has

invested 10 billion Yuan to develop and construct million-ton-class coal liquefaction

��


base in Guizhou Province, simultaneously this group also signed agreements with

Shanxi Province to invest 9,526 million Yuan in Shannxi to comprehensively develop

liquefied-coal oil. As is mentioned in the news from Shandong Provincial Coal office

that Shandong’s top seven coal groups, including Feicheng Mining Industry Group,

have already been constructed or are planning to construct coal-derived oil bases. This

is merely the known part of current coal liquefaction oil projects. In fact, since the

beginning of this year, almost in every place where coal production is going to scale, the

government and enterprises are planning to start “coal liquefaction oil” projects, most of

which have already submitted feasibility study reports or pre-feasibility study reports.

Estimated by Beijing Research Institute of Coal Chemistry some time earlier that, by

2020 the total amount of coal-derived oil of our country could reach 36 million tons to

39 million tons, and can provide about 13% of domestic transportation fuel at the time.

But according to the present rapid developing speed, the production will be far beyond

the estimation.

The economic interest is an important factor to stimulate the development of the

coal chemical industry developing. The prices of petroleum, natural gas price are

continuouly rising, which makes the gasification industry more and more profitable.

According to the viewpoint of Zhang Yuzhuo, deputy general manager of China

Shenhua Group, at present the estimation about the benefit of coal liquefaction mainly

refers to the guide price of 23~28 US dollar per barrel petroleum given by OPEC,

that the profitability will be around 11% with the price of 23 US dollar per barrel

petroleum. But according to the present petroleum price, the coal liquefaction projects

will become more competitive.

6.5 Chinese Government Prohibit Blindly Development of Coal Gasification Technology

As a clean coal technology and as an important part of national energy sources

strategy, coal gasification has been supported by the government. In the last ten years,

the government put forward a series of policies to support the development of coal

gasification industry.

In 1997 the State Council issued “The Ninth Five-Year Plan for Chinese Clean

��


Coal Technology and the Compendium of 2010 Development”. Other laws, statutes

and important policies involving clean coal technology include “The Coal Law of

the People’s Republic of China”, “The Energy-Conservation Law of the People’s

Republic of China”, “The Law of Air-Pollution Prevention of the People’s Republic of

China”, and “Chinese Compendium of Energy-Conservation Policies”. According to

“The Guide for Prior Developing Fields of the Industrialization of High-Technology

(Catalog)”, the government will develop and promote clean coal technology, and will

regulate adoption, construction and management of clean coal techniques.

7 Problems in Recollecting Surveys and Questionnaires

This period of survey began in July 2006, and the questionnaire part started in the

beginning of October, and ended on 15th of Janurary, 2007. During this time, we

conducted surveys to different samples respectively, but didn’t receive effective

questionnaires. Several problems emerge in this result, as discussed below:

Coal gasification technology has not formed a full-scale when applying to coal

chemical industry.

While distributing questionnaires, we discovered that among the enterprises that

rejected our questionnaires, more than 25% of them do not have any intention of

applying the technology, while among the enterprises that accepted our questionnaires,

some of them stated that they had no intention to intoduce this technology. While in the

second period of the survey, involved enterprises were all leading companies in their

region. As a result, we conclude that the application of coal gasification technology has

not formed a full-scale in Chinese coal chemical industry.

Some domestic enterprises overly propagandize coal gasification program, and it lacks

the understanding of the true situation:

When distributing questionnaires, in samples we also found some enterprises which

announced to carry out large coal gasification program. However, after receiving the

questionnaire, they didn’t give any respond. The contact office of some enterprises

didn’t answer the telephone, or just refused the survey by some reason. When we

suggested pay a visit to the company or the location of the program, most enterprises

said there was no great progress, and the program was in operation. We can see that

��


enterprises’ passion on coal gasification through media, but enterprises are reluctant in

telling further information. This situation may be related to the new policy of National

Development and Reform Committee, and the secrecy consideration about commercial

information. But we cannot help worrying about the reality of some programs.

8 Suggestions for Surveys in the Future

To conduct the survey about the demand of coal gasification demand to

specific professions

Coal chemical industry has a wide range. If conducting the survey in some specific

professions, such as fertilizer, refinery, and coal-to-oil industry, we may gain more

accurate information. Due to the development of technology in different professions,

each profession varies in demand for raw materials and technology. In addition, the

government has different policies to different industry. If we just research the coal

gasification technology in general chemical industry market, it may be hard to collect

the accurate information.

To research enterprises by academic communications and other chances

We can take advantage of academic communication and technology conferences to

investigate enterprises. In such activities, many enterprises come for new technology,

to improve their productivity. On one hand, enterprises can understand the application

of this technology; on the other hand, we can directly get to know enterprises’

understanding of the technology itself. As for the methods of survey, the combination

of questionnaires and interviews can be applied.

To Co-operate with the government

We can co-operate with local government, and accomplish the survey in the form of

technology promotion. Coal gasification technology can be applied to many fields,

which are not widely acknowledged. Through the cooperation with local government,

we can not only draw more attention from enterprises, gather more information, but

also can promote the coal gasification technology itself.

The Survey Result Analysis of

Down-stream CTO Products

Part 2

1 A Overview of Coal-to-Olefin Industry Downstream Products in China ···· 39

1.1 The Techniques of Coal Indirect Liquefaction ························ 39

1.2 The Products of Coal Indirect Liquefaction ··························· 40

2 A Brief Introduction of the Implementation of This Survey ············· 41

3 Analysis of the Survey Result ················································· 41

3.1 Analysis on Import and Export ········································ 4 1

3.1.1 Import and Export Volume ·······················································41

3.1.2 The Import and Export Price ·····················································4 8

3.1.3 Analysis on Demand and Supply ··················································49

3.2 Domestic Outputs, Sales, Prices and Tax Rates ······················· 54

3.2.1 Domestic Output of Diesel Oil and Kerosene ··································54

3.2.2 The Producer Price Indexes (PPI) of Diesel Oil and Kerosene ···············55

3.2.3 Provinces of Top Ten Turnover (List by Descending) ··························57

3.2.4 Tax Rate ··············································································5 8

Contents of Part 2

�9

The Survey Result Analysis of Down-stream CTO Products

1 A Overview of Coal-to-Olefin industry Downstream Products in China

The general feature of China’s energy resource is “abundant coal, scanty oil and finite

gas”. In 2003 the total energy consumption in China was 1.1783 billion tons fuel oil

equivalent, including 67.86% coal, 23.35% of petroleum, and 2.5% of natural gas. In

a long term, the crude oil production of China can only keep at a level of 0.16-0.17

billion tons/year. Coal, due to its large reserves and comparatively stable prices, comes

to be the first choice of China’s industry power. In the first fifty years of this century,

coal will still occupy the dominant position in the structure of primary energy sources

in China. At the same time, the petroleum resources will be still in short. The shortage

of oil products is expected to be 0.2 billion tons in 2020. In order to ensure the safety

of oil supply, it is a very important strategy to turn the coal into oil products.

With the development and popularization of the coal gasification technology, the coal

indirect liquefaction technology, which means to produce synthesis gas from the coal

gasification and to produce oil products by the F-T technique, is developed by days.

1.1 The Techniques of Coal Indirect Liquefaction

The indirect liquefaction of coal is a process to gasify coal into synthesis gas, and to

synthesize oil and chemicals from the synthesis gas under the action of catalyst. As

early as in the second decade of the last century, Germany has begun the research on

the indirect liquefaction technology of coal. In 1936 they in the first place built an

industrial scale factory for oil synthesis. Until 1955, there had been 18 oil synthesis

factories in the world, whose total oil producing ability reached 100 million tons/year.

Up to date, the typical commercial technology of the indirect liquefaction of coal

outside China is the F-T synthesis technology of SASOL Company in South Africa.

The main products are up to 113 kinds including gasoline, diesel oil, wax, burning

gas, ammonia, ethylene, propylene, polymer, alcohol, aldehyde, ketone, etc. Beside

the F-T synthesis technology of the SASOL Company in South Africa, there are other

commercialized technology for indirect liquefaction, such as the SMDS technology

of Shell Company, Netherland (the factory is built in Malaysia), the MTG synthesis

technology of Mobil Company (the factory is built in New Zealand). There are also

some advanced but not yet commercialized synthesis technology including the Tigas

technology of Topsoe Company, Denmark, the STG technology of Mobil Company,

U.S.A.

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China resumed its research on the indirect liquefaction of coal group in 1980s; after

that, the Institute of Coal Chemistry, Shanxi has exploited MFT and SMFT technology

and has successively accomplished the initial experiment, the model experiment, the

middle experiment, and the industrial experiment of the MFT technology, and the

model experiment of the SMFT technology. In addition, they also conducted the long-

term operation experiment on two synthesized catalysts. The researches mentioned

above came out with satisfying results. Nowadays, the main existing problems of

domestic technology are about how to quickly form its intellectual property rights,

and how to expand the synthesis equipment in order to adapt itself to the pace of

industrialization.

1.2 The Products of Coal Indirect Liquefaction

The products of indirect liquefied of coal group range widely. For example, by SASOL

fixed fluidized bed technique, products under C4, including CH4 9.9%, C2H6 4.1%, C2H4

5.0%, C3H6 12.3%, C3H8 2.1%, C4H8 8.7%, C4H10 2.0%, etc., account for 44.1% of all

synthesized products; products above C5, including C5～C9 cut fraction 29.7%, C10～

C13 cut fraction 10.0%, C14～C18 cut fraction 6.0%, C19 4.0%,etc., accounts for 49.7%

of all synthesized products. The gaseous hydrocarbon product below C4 can produce

terminal products such as LPG, polymerized propylene, polymerized ethylene through

separation process and disproportionation of olefins. Liquid products above C5 can

produce medium products such as naphtha, α-olefin, C14～C18 alkyl, and rough wax

through cut fraction. Being further refined with hydrogenation, naphtha can produce

advanced ethylene (the ethylene yield can reach 37% - 39%, compared with the 27%

- 28% ethylene yield from naphtha in ordinary refineries); naphtha can also produce

gasoline by reforming. α-olefin can be raw material for good detergent without

refinement, or it can produce aviation gasoline with the refinement. C14～C18 alkyl can

be raw material for good detergent without refinement, or be advanced blending diesel

oil (cetane value reaches 75) through refinement with hydrogenation and isomeric

pour point depressant processing. Rough wax can produce high quality soft wax after

refined with hydrogenation.

According the investigation plan, the focus of this survey includes: naphtha, diesel

oil, N-Paraffin (LDF and HDF), coal oil, olefin, and base oil. In China these products

are mainly produced by petrochemical factories. The data analysis of their production,

import and export is in the third part.

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2 A brief introduction of the Implementation of This Survey

The survey was conducted by the “Coal Gasification Investigation Group” From

August to December 2006, they had accomplished works as follows: 1. Literature

Research. According to documents in the National Library, the Library of Peking

University, electronic journals, and China National Petroleum Corporation, The

investigation group has coordinated and analyzed data of downstream products of coal

chemical industry, and these data are the main sources of this paper. 2. Questionnaire

survey (see the appendix of the enterprises list). Subjects of the survey were drawn

from the yellow page of Enterprises of Chinese Coal Chemical Industry. Data were

collected by phone, fax, mail and other contact methods, but very few data were

successfully collected, because most of the enterprises were not willing to cooperate.

The result of the investigation is listed as curves and diagrams in Part III.

3 Analysis of the Survey Result

3.1 Analysis on Import and Export

Down-stream coal-to-oil products consist of diesel oil, kerosene, naphtha, paraffin

and so on. We consulted and analyzed China’s import and export data of crude oil and

down-stream coal-to-oil products from 2001 to 2005.

3.1.1 Import and Export Volume

China is the second largest oil consumption country. With the rapid development

of national economy since 1990s, the demand for oil and gas has been continually

increasing, therefore, the contradiction between supply and demand is distinctive.

Since 1993, China has changed from a net oil exporter to a net importer. In 2000,

China’s net oil import amount broke through 70 million tons. In 2004, it broke

through the limit of 100 million tons, reaching 143.65 million tons, with the degree of

dependence on oil of 45.2%. In 2005 the amount slightly reduced to 136.176 million

tons, with the degree of dependence of 43.9%. Admitting the fact that the oil demand

will rapidly increase in the future and the fact that domestic resource is very limited,

we can foresee that domestic output cannot satisfy the demand at all, and therefore

China’s degree of dependence on oil will increase yearly (table 6).

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Variety

Import Amounts Export Amounts Net Import Amounts

2000 2001 +-, % 2000 2001 +-, % 2000 2001

Crude Oil 7026.53 6205.54 -14.2 1043.78 755.06 -27.7 5982.75 5270.47

Product Oil①

1804.69 2144.89 18.9 827.18 923.94 11.7 977.51 1220.95

Gasoline 0.03 0.02 -43.6 455.10 577.17 26.8 -455.07 -577.15

Naphtha 12.25 10.94 -10.7 68.74 90.24 31.3 -56.48 -79.31

Aviation Kerosene

218.16 190.68 -12.6 171.75 156.80 -8.7 46.42 33.88

Lamp Oil 0.00 3.77 499354.3 5.48 - - -5.48 3.77

Light Diesel Oil

25.94 27.47 539 55.48 25.65 -53.8 -29.55 1.82

Fuel Oil 1816.09 43.18 1772.91

No.5-7 Fuel Oil

304.68 1033.50 239.2 0.28 0.26 -5.7 304.00 1033.24

Other Fuel Oil

1118.09 782.59 -30.0 30.85 42.91 39.1 1087.25 739.68

Lubricant 13.52 12.92 -4.4 5.16 4.60 -10.9 8.36 8.32

Lubricant Base Oil

42.25 55.11 21.8 9.44 3.09 -67.2 35.82 52.01

Crude Oil + Product Oil

8831.22 8170.04 -7.5 1870.96 1679.00 -10.3 6960.27 6491.43

Liquefied Petroleum

Gas②481.74 488.99 1.6 1.56 2.10 34.7 480.19 486.89

Other Oil Products

Olefin 1.69 20.7 22.6 52.04 54.37 4.5 -50.35 -52.30

Table 1: China’s import and export amounts of crude oil, product oil, liquefied petroleum gas and other products, 2001

Unit: 10,000 tons

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Unit: 10,000 tons

Variety

Import Amounts Export Amounts Net Import Amounts

2001 2002 +-, % 2001 2002 +-, % 2001 2002

Crude Oil 6205.54 6940.77 15.2 755.06 720.81 -4.5 5270.47 6219.96

Product Oil①

2144.89 2035.20 5.1 923.94 1070.81 15.9 1220.95 964.38

Gasoline 0.02 0.01 -67.5 577.17 612.20 6.1 -577.15 -612.19

Naphtha 10.94 24.26 121.8 90.24 91.11 1.0 -79.31 -66.85

Aviation Kerosene

190.68 193.25 1.3 156.80 151.25 -3.5 33.88 42.00

Lamp Oil 3.77 8.19 117.3 - 7.91 - 3.77 0.28

Light Diesel Oil

27.47 48.08 75.0 25.65 125.70 390.1 1.82 -77.62

Fuel Oil 1816.09 1650.31 -9.1 43.18 61.22 41.8 1772.91 1589.09

No.5-7 Fuel Oil

1033.50 1410.45 36.5 0.26 28.42 10652.9 1033.24 1382.02

Other Fuel Oil

782.59 239.86 -69.4 42.91 32.80 -23.6 739.68 207.06

Lubricant 12.92 12.39 -4.1 4.60 4.70 2.3 8.32 7.68

Lubricant Base Oil

55.11 70.04 27.1 3.09 1.93 -37.7 52.01 68.12


8170.04 8975.97 9.9 1679.00 1791.62 6.7 6491.43 7184.35

Liquefied Petroleum

Gas②488.99 626.07 28.0 2.10 5.62 168.0 486.89 620.45

Other Oil Products

Olefin 20.7 1.96 -5.1 54.37 62.34 14.7 -52.30 -60.38

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Unit: 10,000 tons

VarietyImport Amounts Export Amounts Net Import Amounts

2002 2003 +-, % 2002 2003 +-, % 2002 2003

Crude Oil 6940.77 9112.63 31.3 720.81 813.33 12.8 6219.96 8299.29

Product Oil① 2035.20 2823.98 38.8 1070.81 1384.74 29.3 964.38 1439.24

Gasoline 0.01 0.0013 -75.8 612.20 754.24 23.2 -612.19 -754.24

Naphtha 24.26 23.80 -1.9 91.11 113.12 24.2 -66.85 -89.32

Aviation Kerosene

193.25 188.44 -2.5 151.25 183.21 21.1 42.00 5.24

Lamp Oil 8.19 1.05 -87.2 7.91 3.87 -51.1 0.28 -2.82

Light Diesel Oil

48.08 84.75 76.3 125.70 224.06 78.3 -77.62 -139.31

Fuel Oil 1650.31 2378.94 44.2 61.22 74.71 22.0 1589.09 2304.23

No.5-7 Fuel Oil

1410.45 2232.48 58.3 28.42 55.02 93.6 1382.02 2177.46

Other Fuel Oil

239.86 146.46 -38.9 32.80 19.69 -40.0 207.06 126.77

Lubricant 12.39 15.32 23.7 4.70 5.86 24.6 7.68 9.46

Lubricant Base Oil

70.04 78.71 12.4 1.93 8.74 353.6 68.12 69.97


8975.97 11936.61 33.0 1791.62 2198.07 22.7 7184.35 9738.54

Liquefied Petroleum

Gas②626.07 636.81 1.7 5.62 2.40 -57.2 620.45 634.40

Other Oil Products

389.18 156.23 232.95

Olefin 1.96 2.24 14.1 62.34 61.81 -0.9 -60.38 -59.57

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Unit: 10,000 tons

VarietyImport Amounts Export Amounts

Net Import Amounts

2003 2004 +-, % 2003 2004 +-, % 2003 2004

Crude Oil 9112.63 12281.55 34.8 813.33 549.16 -32.5 8299.29 11732.39

Product Oil①

2823.98 3786.79 34.1 1384.74 1145.16 -17.3 1439.24 2641.63

Gasoline 0.0013 0.0044 231.0 754.24 540.71 -28.3 -754.24 -540.71

Naphtha 23.80 5.09 -78.6 113.12 139.74 23.5 -89.32 -134.66

Aviation Kerosene

188.44 277.42 47.2 183.21 203.71 11.2 5.24 73.72

Lamp Oil 1.05 - - 3.87 - - -2.82 -

Light Diesel Oil

84.75 274.94 224.4 224.06 63.65 -71.6 -139.31 211.30

Fuel Oil 2378.94 3053.90 28.4 74.71 180.01 141.0 2304.23 2873.89

No.5-7 Fuel Oil

2232.48 2886.61 29.3 55.02 125.19 127.5 2177.46 2761.42

Other Fuel Oil

146.46 167.29 14.2 19.69 54.82 178.5 126.77 112.47

Lubricant 15.32 18.92 23.5 5.86 6.25 6.6 9.46 12.67

Lubricant Base Oil

78.71 113.51 44.2 8.74 3.77 -56.9 69.97 109.74

Liquefied Petroleum

Gas②636.81 638.61 0.3 2.40 3.19 32.8 634.40 635.42

Other Oil Products

389.18 348.26 -10.5 156.23 206.42 32.1 232.95 141.84

Olefin 2.24 2.98 33.1 61.81 64.21 3.9 -59.57 -61.23

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Unit: 10,000 tons

VarietyImport Amounts Export Amounts Net Import Amounts

2004 2005 +-, % 2004 2005 +-, % 2004 2005

Crude Oil 12281.55 12708.32 3.5 549.16 806.69 46.9 11732.39 11901.63

Product Oil①

3786.79 3146.74 -16.9 1145.16 1400.88 22.3 2641.63 1745.86

Gasoline 0.0044 0.0044 0.7 540.71 563.28 4.2 -540.71 -563.27

Naphtha 5.09 34.90 139.74 177.96 27.3 -134.66 -143.06

Aviation Kerosene

277.42 314.05 13.2 203.71 263.36 29.3 73.72 50.69

Lamp Oil 274.94 53.68 -80.5 63.65 147.51 131.8 211.30 -93.83

Light Diesel Oil

3053.90 2601.27 -14.8 180.01 228.49 26.9 2873.89 2372.78

Fuel Oil 2886.61 2488.80 -13.8 125.19 215.27 72.0 2761.42 2273.52

No.5-7 Fuel Oil

167.29 112.47 -32.8 54.82 13.22 -75.9 112.47 99.26

Other Fuel Oil

18.92 18.34 -3.1 6.25 6.04 -3.3 12.67 12.30

Lubricant 113.51 93.53 -17.6 3.77 6.79 80.3 109.74 86.74

Lubricant Base Oil

43.01 30.96 -28.0 7.33 7.46 1.9 35.69 23.50

Liquefied Petroleum

Gas②638.61 614.12 -3.8 3.19 2.67 -16.3 635.42 611.45

Other Oil Products

348.26 383.71 10.2 206.42 281.76 36.5 141.84 101.96

Olefin 2.98 2.35 -21.3 64.21 72.72 13.2 -61.23 -70.37

��


Among imported product oil, fuel oil is the main part. In 2005 the imported amount of

fuel oil was 25.995 million tons, or 82.7% of total product oil importation, droppings

by 17.7% compared with the last year; kerosene import amount ranked second at 3.283

million tons, or 10.4% of total product oil importation, rising 8.1% compared with

the last year. Gasoline is the major part of product oil exportation. In 2005 gasoline

exportation was 5.597 million tons, or 40.0% or total product oil exportation, rising

by 3.5% compared with the last year; in the next place is kerosene, with 2.687 million

tons exportation, or 19.2% of total product oil exportation, rising by 28.1% compared

with the last year; the exportation of fuel oil is 2.2285 million tons, rising by 26.9%

compared with data of 2004.

In 2002, 2003 and 2004, China’s net petroleum importation rapidly rose by 16%,

32% and 43% in respective year. After that, under the influence of quickly rising

international oil price, China’s net petroleum importation (including crude oil, product

oil, liquefied petroleum gas and other oil products) dropped by 5.2% compared with

the last year, or 143.61 million tons. The increasing speed of domestic petroleum

Table 6: China’s net importation of crude oil and product oil, 1990-2005

Unit: 10,000 tons

Variety 1990 1995 2000 2002 2003 2004 2005

Crude Oil -2106 -174 5983 6220 8299 11732 11902

Product Oil -224 1024 978 964 1439 2642 1746

Gasoline -163 -170 -455 -612 -754 -541 -563

Naphtha -54 40 -56 -67 -89 -135 -143

Aviation Kerosene

-44 39 46 42 5 74 51

Light Diesel Oil 46 469 -30 -78 -139 211 -94

Fuel Oil 6 582 0 1589 2304 2874 2373

Liquefied Petroleum Gas

11 224 480 620 634 635 611

Olefin -18 -27 -50 -60 -60 -61 -70

p.s. ① product oil consist of not only gasoline, naphtha, coal oil diesel oil and fuel oil, but also liquid

olefin, lubricant, etc. ② Liquefied Petroleum Gas includes propane, butane and mix liquefied gas.

�8


production made the increase in net import of crude oil only 1.4%, or 119.02 million

tons; the importation of fuel oil and diesel oil greatly reduced, and the exportation of

gasoline and diesel oil increased, resulting the net importation of product oil dropping

to 17.46 million tons, or by 33.9% compared with the number of 26.42 million tons

of 2004; the high price also restrained the demand for the importation of liquefied

petroleum gas, leading to the first fall in the passed five years from 6.3861 million tons

to 6.1412 million tons.

The expediting increase of domestic oil production led to the increase in net

importation of crude oil only rose by 1.4%, or 119.02 million tons, after a huge rise

of 41.4% in 2004 (see table 6). Inverted with international market price of major

oil products, domestic market prices led to a big reduce in demand for importing

fuel oil and diesel oil, and an increase in gasoline and diesel oil exportation. The

net importation of oil products reduced by 33.9%, or 17.46 million tons, compared

with 26.42 million tons of 2004. The net importation of other oil products, including

naphtha, petroleum coke and bitumen, reduced by 28.1% to 1.02 million tons. Since

the net importation of petroleum decreased, the net exportation of petroleum only rose

by 14% to $49.197 billion, compared with 112.56% in 2004. For 2006, we expect that

the need to build an energy-conserving society will impel a reform in the price system

for oil products; oil consumption will increase more quickly than 2005 under the fast-

developing economy. We assume that China’s oil consumption of 2006 will increase

by 6% to 333 million tons. After the temporary low degree of dependence on imported

petroleum, the degree will slightly rally in 2006, but probably still lower than 49% of 2004.

3.1.2 The Import and Export Price

Fig.1: China’s average export price of paraffin, kerosene and diesel oil

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According to the Fig.1, the trends of the price changes of diesel oil, kerosene and

paraffin are consistent, and they are completely relevant.

3.1.3 Analysis on Demand and Supply

3.1.3.1 Rising demand in diesel oil and existing supply-demand conflict

In the past two years, the fast increasing demand in diesel oil is the most distinctive

among major fuel oil products. In 2005, the consumption of oil products rose by about

4%, and diesel oil consumption may have risen by at least 5%. Although the domestic

supply of diesel oil was short for most the time, China still shifted from a net import

nation to a net export one for diesel oil in 2005, with the net exportation of 940,000

tons, compared with the net importation of 2.11 million tons in 2004. Government’

s control in fuel and electricity prices made the price of domestic oil products went

up at a much lower rate than that of international market, so the oil refining industry

gained a serious deficit in 2005, and refineries were stimulated to enhance the export to

balance the loss, which led to fewer domestic resources. In summer 2005, temporary

oil shortage occurred in some southern cities, and the diesel oil exportation suddenly

dropped, accompanied with increase in importation. From September to December,

the exportation of diesel oil and gasoline deeply dropped by the government’s two

measures: to suspend the tax reimbursement for gasoline, and to limit gasoline and

diesel oil, which was listed in refineries’ processing and trade contract, in domestic

sale. Compared with 2004, the exportation of gasoline for automobiles increased by

4.2% to 5.6328 million tons (see Table 5). The exportation of diesel oil came to the

top in August at 318,200 tons, and decreased monthly after September. However,

the total exportation of the year still increased by 1.31 times compared with 2004, to

1.4751 million tons (see Table 5). Because of the great loss in diesel oil exportation,

the importation of diesel oil remained only 20,000 tons in the bonded warehouse until

September 2005. It is after October that the importation gained some slight increase.

According to the data above and other data we collected, we come up with the

fluctuation trend of the import and export of diesel oil by using moving average

formula, so that we can make some simulation and prediction.

�0


From Diagram 1 and Table 6 we can see that the China’s net importation of diesel

oil has been in big fluctuation since 2000; recently (January 2005-July 2006), the

fluctuation occurred more frequently due to the difference between international and

domestic oil price. To accurately predict the net importation of diesel oil, we have

to definitude the difference between international and domestic oil price. But so far

China’s oil price has not been geared to international standards, so that it is very hard

to estimate. However, we are very positive that as the fast development of Chinese

economy, the domestic demand for diesel oil will keep rising for a long time.

3.1.3.2 The demand for coal oil quickly rises with a stable supply market

Diagram 1: China’s Importation of Diesel Oil

Diagram 2: China’s Importation of Coal Oil

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From Table 6 we can see that China’s net importation of coal oil has been steadily

increasing, except for the trough in 2003. Besides, from Diagram 2 and 3 we can

conclude that from January 2005 to July 2006, China’s importation and exportation

of coal oil had been in balance and steadily increasing. From the data above we can

predict that the demand for coal oil in Chinese market was a very stable one.

3.1.3.3 The trend of Import and Export of Naphtha is stable

From Diagram 4 and 5 we can see an obvious trend for the import and export of

naphtha in China, meaning the exportation had been rapidly decreasing from 2000

until 2004. However, several new ethylene equipments were put into production

in 2005, and since then the importation of naphtha sharply increased. After the

foundation of two large-scale ethylene equipments, Jiangsu Yangba (600,000 tons/

year) and Shanghai Saike (900,000 tons/year), the only way to meet the demand for

naphtha is to increase its importation. The reason lies in the fact that the two new

equipments needed 2 million and 3 million naphtha respectively as the raw material,

but naphtha’s cut fraction overlaps gasoline’s, which means the production increase

in naphtha will definitely lead to the decrease in gasoline. As a result, after the newly

founded ethylene equipments were put into production in the third season of 2005,

although Sinopec arranged JinlingPec for Yanba to provide naphtha, and Zhenhai,

Gaoqiao and Maoming for Saike, the importation of naphtha in the third season

exceeded the total amount of 2004. The total importation of 2005 increased by 5.86

Diagram 3: China’s Exportation of Coal Oil

�2


times to 349,000 tons. China National Offshore Oil Corp. and Shell plan to build a

joint venture program for ethylene in Huizhou, Guangdong Province, in the beginning

of 2006. This program will have the productivity of 800,000 tons/year, which will

form the demand for 2.65 million tons naphtha, and the naphtha will all depend

on importation. As a result, although China had been a net exportation country for

naphtha for six years before 2005, even with the highest exportation amount of 1.397

million tons in 2005, it is possible for China to change to a net importation country in

2006 according to the trend up to date.

Diagram 5: China’s Exportation of Naphtha

Diagram 4: China’s Importation of Naphtha

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3.1.3.4 The demand for Olefin steadily increase with a stable supply

From table 6 we can see that from 1990 to 2005, China had a negative net importation

of olefin, and the importation kept decreasing. From diagram 6 we can also see that

China’s exportation of olefin kept increasing in this period. As a result, we can deduce

that in this period there was a steady growth in import and export trades of olefin, and

domestic production and demand of olefin was generally rising at the same time. From

diagram 7 we can see that China’s exportation of olefin had a gentle trend from Jan.

2005 to July 2006.

Diagram 7: China’s Exportation of Olefin

Diagram 6: China’s Importation of Olefin

��


To sum up, among down-stream coal-to-oil products, the importation and exportation

of diesel oil is relatively hard to predict; the import and export trend of coal oil and

olefin is quite stable, so is the increase in domestic demand; the domestic demand for

naphtha increases sharply, and its importation will overrun the exportation.

3.2 Domestic Outputs, Sales, Prices and Tax Rates

3.2.1 Domestic Output of Diesel Oil and Kerosene

Fig. 3: China’s output of diesel oil

Fig. 2: China’s output of kerosene

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According to Fig. 2 and Fig. 3, the output of kerosene is fluctuating around 800 kiloton

coal equivalent, and the output of diesel oil is fluctuating around 9600 kiloton coal

equivalent. A negative correlation is between them. The outputs of diesel oil and

kerosene have been maintained stability since April 2006.

3.2.2 The Producer Price Indexes (PPI) of Diesel Oil and Kerosene

According to Fig. 4, the PPI is stabile. From November 2004 to July 2006, the PPI

was Fluctuating around 120. Additionally, the fluctuation is less then 10, except the

fluctuation in May 2006.

Fig. 4: China’s Producer Price Indexes of kerosene

Fig. 5: China’s Producer Price Indexes of diesel oil

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According to Fig. 5, the PPI of diesel is stabile. And the PPI is fluctuating around 120.

It is obviously cyclic.

Especially, in December 2006, the price of petroleum was reduced in most parts of

China. It is the second bowlest prices in 20 price adjustment in China since 2001. And

it is imply that we open crude oil and refined oil market to the world, and the domestic

refined oil prices were connected to international practice, which is our promise to

WTO. International price of petroleum has being reduced from 70 dollar/ bucket in

May, 2006 to 50 dollar/ bucket presently. But, during this period, domestic price of

petroleum has not been reduced. The prices have fallen off in November which is the

start that domestic prices are joint with international market. Though diesel oil prices

have not fallen off, most experts suggest that diesel oil price is hard to fall off for its

shortage. The refined oil prices have fallen off in phase, and the diesel price would be

fallen off in the future.

We make the refined oil prices in phase: June 3, 1998, State Development Planning

Commission, which had been changed into National Development and Reform

Commission, promulgated crude oil and refined oil prices reform program. In the

program, China National Petroleum Corporation, China Petroleum and Chemical

Corporation could make benchmark trade price by negotiation, and the price is composed

of benchmark price and backwardation. Crude oil benchmark price was referred to

the international average price of kindred crude oil last month by State Development

Planning Commission, and the backwardation was decided by bargainers. State

Development Planning Commission made directive prices of gasoline and diesel oil. The

directive prices were composed of import tariff cost and domestic reasonable circulation

charges. China National Petroleum Corporation and China Petroleum and Chemical

Corporation could fluctuate 5 percent on this basis as retail price.

November 2001, we reach a new stage, in which we improve the accordance

mechanism of domestic refined oil prices. Instead of confirming domestic refined

oil prices in accordance with Singapore oil prices, we adjusted them referring to

Singapore Rotterdam and New York refined oil prices. It is the machine by three places.

Specifically, the weighted average of Singapore Rotterdam and New York refined oil

prices last month added circulation charges is the domestic prices. But, if the fluctuation

of the weighted average prices of the three places is more than 8 percent, National

Development and Reform Commission will make a new benchmark price.

��


A new prices machine was promulgate presently: controllable connecting domestic

gasoline and diesel oil prices to international market, and in principle, compensating

the most cost reasonably, and giving adequate profits to oil refining enterprise. We

usually named “crude oil cost way”, that regarding Brent Dubai and Minas crude oil

prices as benchmark. Sequentially, domestic prices could stick to international crude

oil prices. This new prices machine would be benefit to corresponding domestic crude

oil and refined oil prices gradually.

3.2.3 Provinces of Top Ten Turnover (List by Descending)

1990 1995 2000 2002 2003 2004

Guangdong Gangdong Guangdong Guangdong Guangdong Guangdong

Shandong Shandong Heilongjiang Zhejiang Zhejiang Zhejiang

Jiangsu Zhejiang Zhejiang Heilongjiang Shandong Shandong

Hubei Heilongjiang Jiangsu Jiangsu Heilongjiang Jiangsu

Heilongjiang Jiangsu Shandong Hubei Jiangsu Heilongjiang

Liaoning Hubei Hubei Liaoning Hubei Hubei

He'nan Hebei Fujian Shanghai Shanghai Shanghai

Hebei Fujian Tianjin Fujiang Liaoning Fujian

Zhejiang Liaoning Liaoning Shandong Fujian Liaoning

Shanghai He'nan Hebei Guangxi jiangxi Guangxi

Table 7: Provinces of top ten diesel oil turnover（1990-2004）

Table 8: Provinces of top ten kerosene turnover（1990-2004）

1990 1995 2000 2002 2003 2004

Beijing Beijing Beijing Beijing Beijing Beijing

Guangdong Guangdong Guangdong Shanhai Guangdong Shanghai

Sichuan Shanghai Shanghai Guangdong Shanghai Guangdong

Shanghai Sichuan Shandong Sichuan Sichuan Sichuan

Jiangsu Shandong Jiangsu Shandong Hainan Hainan

Hubei Shanxi Sichuan Shanxi Shanxi Shanxi

Shandong He'nan Hainan Liaoning Fujian Fujian

Anhui Xinjiang Xinjiang Yunnan Yunnan Yunnan

Shanxi Hubei Shanxi Hubei Tianjin Shandong

He'nan Liaoning Yunnan Xinjiang Liaoning Liaoning

�8


Date source: Chinese statistical data support system, www.jkck.com, China INFOBANK, China statistical year book, www.echemnet.com.cn/ , China customs, http://tariff.sol.com.cn/, www.taxrefund.com.cn

According to Tab.7 and Tab.8, Guangdong Shandong and Zhejiang are the three most

important provinces in diesel oil consumption, and Beijing Guangdong and Shanghai

in kerosene consumption. The order of provinces is stabile.

3.2.4. Tax Rate

Table 9: Tex Rate (until November 2006)

Pruduct YearMeasurement

units VAT rate

Consumption tax rate

Import tariff (MFN/

General)

Export tax rate

Export tax

rebates

Tax rate

naphtha 2006 kg 17 0 6/20 0 13 17

Light diesel oil 2006 kg 17 0 6/11 0 0 17

Heavy diesel oil

2006 kg 17 0 6/20 0 0 17

Jet fuel 2006 kg 17 0 9/14 0 0 17

Normal alkane

2006 kg 17 0 6/20 0 13 17

Base oil for lubricating oil

2006 kg 17 0 6/17 0 0 17

http://www.jkck.com

http://www.echemnet.com.cn

http://tariff.sol.com.cn

http://www.taxrefund.com.cn

http://www.taxrefund.com.cn

report on applying coal gasification technology in china's coal chemical industry

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