China seeks oil from coal

01 July 2008

With oil prices at historic highs, China is moving full steam ahead with a controversial process to turn its vast coal reserves into barrels of oil, reports Reuters.

Known as coal-to-liquid (CTL), the process is reviled by environmentalists who say it causes excessive greenhouse gases.
Yet the possibility of obtaining oil from coal and being fuel self-sufficient is enticing to coal-rich countries seeking to secure their energy supply in an age of increased debate about how long the world’s oil reserves can continue to meet demand.
The United States, Australia and India are among those countries looking at CTL technology but are constrained by environmental concerns.
But China, which lacks the powerful environmental lobbyists that might stymie any widescale initiative elsewhere, is building a major complex on the grasslands of Inner Mongolia.
“Those countries with large coal reserves, like South Africa, China or the United States, are very keen on CTL as it helps ensure energy security,” said Yuichiro Shimura at Mitsubishi Research Institute Inc (MRI) in Tokyo.
“However, the problem is that it creates a lot of carbon dioxide. Also you need a huge amount of energy for liquefaction, which means you end up wasting quite a lot of energy,” the chief consultant at MRI in charge of energy told Reuters.
In Erdos, Inner Mongolia, about 10,000 workers are putting the final touches to a CTL plant that will be run by state-owned Shenhua Group, China’s biggest coal mine. The plant will be the biggest outside of South Africa.
“We cannot fail,” Zhang Jiming, deputy general manager at Shenhua Coal Liquefaction, said. “If things go smoothly, we will start with the expansion next year.”
The plant will start operating later this year and is expected to convert 3.5 million tonnes of coal per year into 1 million tonnes of oil products such as diesel for cars.
That’s the equivalent of about 20,000 barrels a day, a tiny percentage of China’s oil needs as oil consumption in China is around 7.2 million barrels a day.
If all goes well, then Inner Mongolia will push on with an ambitious plan to turn half of its coal output into liquid fuel or chemicals by 2010. This would be around 135 million tonnes, or about 40 per cent of Australia’s annual coal output.
The region hopes CTL will propel development while contributing to Beijing’s plan to have CTL capacity of 50 million tonnes by 2020. That would be about 286,000 barrels a day, or about four per cent of China’s energy needs based on current consumption.

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