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China looks to coal to oil the
wheels of industry
BEIJING
- Turning China's abundant coal reserves into oil
to help close a widening supply gap might once
have seemed a little more than a dream, but
synthetic fuels may soon be a key part of the
country's energy mix.
Optimists say China
could be making up to 1.2 million barrels per day
(bpd) of liquid fuel from coal in 10 years,
equivalent to more than a sixth of current demand,
as high prices and a growing import reliance renew
interest in the process. Pessimists say
uncertainty over the price of oil and that of
coal, which has also surged, will impede
development.
Output is now little more
than a dribble, but with crude prices as much as
double the cost of producing oil from coal, the
industry is gaining traction. At least eight
projects are now either under construction or
expected to get government approval, says
Beijing-based CERA analyst James Brock. Not all of
them are designed to promote conventional fuel
replacements. Their diverse output includes
petrochemical feedstock and dimethyl ether, touted
as a potential alternative to diesel. But they
will all sap demand for oil. "I see them
substituting for 20-60 million tons [in a
decade]," said Brock.
Liquefaction, in
which coal is crushed and heated to produce gas,
then concentrated into liquid fuel, was once seen
as an expensive fallback. But crude oil prices,
which rallied to more than US$58 last month and
are seen averaging above US$40 through to next
year, have spurred new interest from businesses.
It is among a host of oil alternatives, such as
ethanol and gas-to-liquids projects, that have
been given new life by oil's two-year boom.
The Chinese government is prepared to
stump up cash as it worries over reliance on oil
from potentially unstable regions. Last year China
imported more than 40% of its needs and faces the
prospect of a global race for resources. Li
Yongwang of Synfuels China, part of the Institute
of Coal Chemistry, sees viably priced output
reaching 10 million to 30 million tons a year
within a decade.
Li's institute, kept
afloat by government funds during the 1990s when
cheap oil dimmed interest in liquefaction, now
gets about 60% of its funding from industry. "With
coal at about $10 a ton, we are very confident we
can get oil at a cost of about $25 per barrel," he
said.
Crude prices have averaged over $50
a barrel this year, compared with under $20 a
barrel from South Africa's Sasol, which produces
about 160,000 bpd of coal-based liquids. Although
foreign players are moving into China, domestic
investment is the main driver, with local
governments, businesspeople and even coal mining
firms interested in projects. Coal already
provides up to 70% of China's energy needs, mostly
for the power sector and the steel industry.
(Asia Pulse/XIC) |
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