After repeated deliberations and extensive argumentation, the "13th Five-Year Plan for Coal Deep Processing Industry Demonstration" and the "Layout Plan for Innovative Development of Modern Coal Chemical Industry" were released in early 2017. However, facing persistently low international oil prices and significant economic pressure on the modern coal chemical industry's development, there has always been discussion and debate domestically regarding how the modern coal chemical industry should develop in the future and in which direction it should proceed.
A major consulting project by the Chinese Academy of Engineering, titled "Strategic Research on Major Issues of Sustainable Development and Regional Coordinated Development of China's Refining and Coal Chemical Industry," lasted for two years. Academicians and experts from the petrochemical and coal chemical sectors, based on on-site inspections of over 20 modern coal chemical projects, conducted systematic discussions focusing on the current status and future direction of the modern coal chemical industry, reaching the following research conclusions:
1. Modern Coal Chemical Industry Has Established a Foundation for Development
The Industry Has Achieved a Certain Scale of Development
As of the end of 2016, our country had completed the construction of 1 direct coal liquefaction project and 5 indirect coal liquefaction projects, with a total capacity reaching 6.95 million tons/year. Ten coal-to-olefin (CTO) facilities, each with a capacity of 500,000-600,000 tons/year, were also completed, reaching a total capacity of 5.74 million tons/year. Additionally, three coal-to-natural gas (SNG) projects were built, with a total capacity of 3.1 billion cubic meters/year, and eleven coal-to-ethylene glycol (CTEG) units, each with a capacity of 200,000 tons/year, were completed, totaling 2.7 million tons/year.
2. Core Technologies Are Internationally Leading
Process technologies with proprietary intellectual property rights, such as coal direct liquefaction, coal indirect liquefaction, coal gasification, methanol-to-olefins (MTO), methanol-to-ethylene glycol (MTEG), and methanol-to-aromatics (MTA), have collectively reached world-leading or advanced levels. The localization rate of industrial equipment has reached approximately 90%. A large number of independently developed gasification technology equipment have achieved industrial operation. We possess the capability to independently manufacture major equipment and control systems, including large-scale gasifiers (coal feed rate ≥ 3,000 tons/day), large-scale air separation units (oxygen production ≥ 100,000 cubic meters/hour), large-scale hydrogenation liquefaction and Fischer-Tropsch synthesis reactors (weight ≥ 2,000 tons), large process compressor units, large high-differential pressure, wear-resistant, pressure-reducing control valves suitable for harsh conditions, and high-temperature, high-solids-content coal slurry pumps.
After a period of commercial operation and continuous improvement, the completed demonstration projects have shown continuous advancements in process technology, energy efficiency, and environmental protection. For instance, the water consumption per ton of oil for the newly completed Shenhua Ningmei 4 million tons/year coal indirect liquefaction project has decreased from 16 tons to 6 tons, and excellent projects can achieve near-zero emissions.
3. Production of Oil Products Difficult for Conventional Refineries to Produce
Coal direct liquefaction produces ultra-clean gasoline and diesel, military-grade oils, high-density aviation kerosene, rocket kerosene, and other specialty oil products, as well as high-value-added chemicals. Some of these products have filled domestic gaps and hold immense application potential in the defense sector. Completed test flights of fighter jets, rocket engine tests, and armored vehicle trial runs have demonstrated the excellent performance of coal direct liquefaction oil products. High-value-added chemicals produced by coal indirect liquefaction, such as low-aromatic solvent oils, high-melting-point Fischer-Tropsch waxes, and high-grade lubricant base oils, possess certain market competitiveness. According to full-vehicle operation and bench tests completed by the Chinese Academy of Environmental Sciences, coal-derived clean diesel, when compared to National V standard diesel, can reduce exhaust emissions of carbon monoxide, fine particulate matter, nitrogen oxides, and hydrocarbons by 24%, 49%, 12%, and 34% respectively.
4. Has Become an Important Supplement to Petrochemical Products
The development of modern coal chemical industry has promoted the diversification of raw materials in the petrochemical sector, partially compensating for the insufficient supply of naphtha in our country and enhancing the supply of certain chemical products.
As of the end of 2016, the total capacity for coal-to-olefins reached 5.74 million tons/year, accounting for 11.39% of the national total ethylene and propylene capacity. The total capacity for coal-to-natural gas was 3.1 billion cubic meters/year, with a production of 2.16 billion cubic meters, representing 1.57% of the national apparent natural gas consumption. Additionally, 11 sets of 200,000-ton-level coal-to-ethylene glycol facilities had been built, with a combined capacity of 2.7 million tons/year, accounting for 32.8% of the national total ethylene glycol capacity.
5. The Economic Viability of Industrial Technology Proven Through Periods of High and Low Oil Prices
Survey results indicate that when international oil prices were operating at high levels, modern coal chemical projects achieved good profitability. When international oil prices were around $40/barrel, coal-to-oil and coal-to-gas enterprises incurred losses, while coal-to-olefins projects achieved slight profits. Project research results show that, under a coal price of 220 RMB/ton, the current strictest environmental protection requirements, and a carbon trading price of 20 RMB/ton, the break-even point for coal direct liquefaction projects is a Brent oil price of $50-55/barrel. The break-even point for coal indirect liquefaction is $60-65/barrel, and for coal-to-olefins, it is $40-45/barrel.
This means that when international oil prices are not lower than $65/barrel, modern coal chemical projects can achieve overall profitability (or at least break even). When international oil prices are approximately $85/barrel, modern coal chemicals can generally reach the industry benchmark internal rate of return (11% pre-tax). Recently, international oil prices have rebounded to around $60/barrel, bringing favorable news for the development of modern coal chemicals.
It should be noted that the modern coal chemical industry is still in its early stages of development. Its growth continues to face challenges such as the need for further refinement of process technologies, strengthening of industry regulation, and adjustment of its layout. Issues of water resources, environmental protection, carbon emissions, and industrial competitiveness, which are widely concerned and worried about by society, have consistently constrained the industry's development. These problems need to be gradually resolved through upgrade demonstrations during the "13th Five-Year Plan" period and further technological innovation in future development.
II. Opportunities and Challenges Facing Industry Development
Opportunity 1: The industry's development positioning has been clarified.
In February 2017, approved by the State Council, the National Energy Administration issued the "13th Five-Year Plan for the Demonstration of Coal Deep Processing Industry." In March, the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) jointly issued the "Layout Plan for Innovation and Development of Modern Coal Chemical Industry." These documents explicitly state that "appropriately developing the coal deep processing industry is not only a need for national energy strategic technical reserves and capacity reserves, but also an important measure to promote the clean and efficient utilization of coal and ensure national energy security." They further emphasize that the industry should be "cultivated into an important component of our country's modern energy system," thereby further clarifying the industry's positioning at the national level.
Opportunity 2: Demand for national energy security.
Our country has become a major global consumer and importer of oil and natural gas. In 2016, the external dependence on crude oil reached over 60%, and for natural gas, it was 36.6%, with an increasing trend year by year.
Driven by increasingly stringent national environmental protection requirements, the pace of oil product quality upgrading has accelerated. Developing coal-to-oil technology can enrich the diversified supply of high-quality, clean oil products and reduce the impact of oil use on hazy weather. Our country also has a high external dependence on some basic petrochemical products. In 2016, the self-sufficiency rates for ethylene (equivalent), paraxylene, polyethylene, ethylene glycol, and styrene were 52.5%, 43%, 62.9%, 34.6%, and 60% respectively. Therefore, there is significant room for development in the modern coal chemical industry.
Opportunity 3: Demand for Clean and Efficient Utilization of Coal.
The widespread and severe smog experienced nationwide underscores the critical need for our country to prioritize and enhance the clean utilization of coal. The modern coal chemical industry is a strategic emerging industry that promotes the clean and efficient utilization of coal and the transformation and upgrading of the coal sector. It is also an effective pathway for extending the coal industry value chain. Coal-to-liquid (CTL) and coal-to-gas (CTG) technologies can convert complex and "unclean" coal into high-quality, clean oil products and natural gas. Coal-to-chemicals (CTC) can fully convert or utilize elements such as carbon, hydrogen, sulfur, and oxygen present in coal. The gaseous pollutants generated during the production process are significantly lower than those from direct coal combustion, and a portion of the carbon can be solidified within chemical products.
Opportunity 4: Demand for Regional Economic Development.
Modern coal chemical projects involve significant investment, offer high added value, and incur high taxes and fees per ton of oil products. Developing the modern coal chemical industry can effectively stimulate regional economic growth and help major coal-producing provinces optimize and upgrade their industrial structures, leading to high enthusiasm from these provinces.
III. "13th Five-Year Plan" Development Priorities and Future Directions for Modern Coal Chemical Industry
The "Planning for Upgrading and Demonstration of Coal Deep Processing Industry (2016-2020)" explicitly outlines the key tasks for the modern coal chemical industry during the "13th Five-Year Plan" period. It mandates focusing on the upgrade and demonstration of five types of models and general technical equipment: coal-to-oil, coal-to-natural gas, low-rank coal comprehensive utilization (multi-production), coal-to-chemicals, and integrated utilization of coal and petroleum. Through systematic integration, process optimization, product structure adjustment, and management improvement, the aim is to address current environmental and water resource issues in the modern coal chemical industry, further reduce engineering costs, and enhance industrial competitiveness.
Research suggests that the "13th Five-Year Plan" period and the subsequent longer period will be crucial for the upgrading and demonstration of China's modern coal chemical industry. Emphasis should be placed on research and work in the following areas:
1. Strengthening the Research, Development, and Production of Ultra-Clean and Specialty Oils from Coal.
Utilizing the characteristics of direct coal liquefaction products such as high naphthenic content, low pour point, high density, and low viscosity index, research should focus on producing products difficult to achieve through petrochemical processes. This includes, in particular, oils for military and civilian aircraft, aerospace rockets, and specialized armored vehicles, to meet China's growing demand for specialty oils and ensure national defense requirements.
Leveraging the ability of indirect coal liquefaction to produce sulfur-free, low-olefin, and low-aromatic ultra-clean oils, these products can provide high-quality blending components for national clean oil products and oil upgrading. They can also yield high-quality naphtha for steam cracking, along with high-value-added products such as high-purity paraffin wax, solvent oils, alpha-olefins, and high-grade lubricants. As demand for specialty fuels and upgraded oils increases, the advantages of coal-to-oil products will be further realized.
2. Developing High-End, Differentiated New Material Product Chains from Coal-to-Olefins and Coal-to-Ethylene Glycol.
The oxalate route for coal-to-ethylene glycol technology is evolving towards lower cost, higher selectivity, and longer catalyst life. With continuous optimization of product quality and increasing acceptance and application by downstream users, coal-to-ethylene glycol has begun to be widely used in the polyester fiber industry. While downstream processing of PE and PP can create hundreds of market terminal products, most coal-based polyolefins currently produced are low-end commodity products, with few specialty grades of polyethylene and polypropylene.
It is imperative to strengthen scientific and technological breakthroughs around major key common technologies and equipment to quickly change the current situation of homogeneous terminal products, thus forming a new landscape of high-end, differentiated terminal products. Through technological innovation and international cooperation, product chains should be extended to rapidly cultivate a "product tree" of high-end, differentiated PE and PP products. Several enterprises and research institutions have already initiated research in this area.
3. Promote continuous, stable, and clean production of coal-to-natural gas under high load conditions.
Addressing current issues with coal-to-natural gas, such as difficulty for products to enter gas pipelines, large annual load fluctuations when used as a peak-shaving gas source, and poor economic efficiency, efforts should be strengthened to achieve synergistic safeguards for the supply security of imported pipeline natural gas, resolve the long-distance energy transmission problem from coal-rich regions, and provide clean fuel for key air pollution control areas.
4. Vigorously advance a new model for hierarchical and graded utilization of low-rank coal.
Compared to direct coal combustion, the advantage of hierarchical and graded utilization of low-rank coal lies in its ability to achieve cascaded utilization of materials and energy, thereby improving coal utilization efficiency and increasing its added value. For low-rank coal formed later, with high volatile content and high reactivity, a new multi-generation model of "oil, gas, chemicals, and electricity" should be explored through technologies such as pyrolysis, semi-coke utilization, and tar hydrogenation, to enhance the overall level of clean and efficient coal utilization.
5. Strengthen the integrated development of the modern coal chemical industry and the refining industry.
Strengthening the integrated and coordinated development of the coal chemical and refining industries will not only enhance the comprehensive competitiveness of the modern coal chemical industry but also, through the specific characteristics and cleanliness of coal-based oil products, assist the refining industry in upgrading the quality of refined oil products and reducing refining costs.
Given the current overcapacity in refining, active discussions should explore how these two industries can leverage their respective strengths, achieve differentiated layouts, integrate development, and realize product blending and complementary product performance. By coordinating resource utilization, complementing technologies, and blending products, the two industries can forge a development path suitable for the chemical industry.
For example, independent refineries could consider developing coal-to-hydrogen technology to save on raw materials like refinery natural gas and light hydrocarbons used for hydrogen production, thereby reducing oil processing costs. For modern coal chemical plants and refineries located at some distance from each other, research can be conducted on achieving "carbon-hydrogen complementarity" and integrated utilization of coal, oil, and gas resources, exploring the possibilities of synergistic layouts such as oil-coal integration, coal-aromatic integration, and coal-chemical integration.
The country should leverage its advantageous coal resources in the west to strategically deploy modern coal chemical facilities in western regions, complementing petrochemicals with differentiated layouts to fill regional market gaps and drive the downstream extension of petrochemical products in the central and western parts of the country. Relying on technological innovation, the development of the modern coal chemical industry has already subverted the traditional notion of a narrow downstream product path for C1 chemistry. It is believed that future innovative development in the modern coal chemical industry will further open up vast product spaces for C1 chemistry. (Excerpted from China Energy Net)
