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    China Business
     Jul 20, 2006
Weaning China away from coal

BEIJING - Nearly half of China's energy is expected to come from sources other than coal 15 years from now, as the country is determined to optimize energy consumption by alleviating coal dependency, experts and officials have said.

Coal will be used in an increasingly clean and efficient way to protect the environment and ensure energy security, experts proposed in the "2006 China Energy Development Report", which was published by the Social Sciences Academic Press early this week in Beijing.

As the world's second-largest consumer of energy after the United States, China is heavily dependent on coal, which accounted for 67.7% of its energy consumption in 2004, or one-third of the coal

consumed worldwide, Cui Minxuan, a researcher with the Chinese Academy of Social Sciences (CASS), said in the report.

In economies with a more balanced energy use structure, petroleum usually makes up 30-40% of total energy consumption, while coal makes up a modest 10-20%, according to Cui.

Sixty-eight percent of China's annual energy use since 2003 has been fueled by coal, while less than 23% came from petroleum, according to official statistics.

"To sustain China's economic growth along a rapid and sound track, the country must optimize its consumption structure by rapidly developing natural gas, hydropower and nuclear power and using more renewable energy," Cui said. The optimized structure would translate into improved energy use efficiency and reduced total energy demands, he said.

In the annual energy development report, Cui and his colleagues predict that by 2010, 61.2% of the country's energy consumption will still come from coal, but petroleum consumption will become a quarter of total energy consumption. Natural gas, on the other hand, will double from the 2003 level to reach 5.3% of the country's total energy consumption.

By 2020, petroleum, gas and electricity combined will have a 46% share of total energy consumption, while the proportion of coal will shrink to 54%, according to the report.

Hu Yuhong, an official with the China Coal Industry Association, said she believed the ratio of natural gas would continue to edge up in the years ahead, with projects launched to transfer gas from the country's west to its east and to import gas from Russia. But ultimately, coal will remain the major source of energy to fuel China's economy in the decades to come, she said.

With coal occupying such a dominant position in its energy pool, China has been planning to improve coal-use efficiency and has been studying clean coal technology since late 1980s, said Huang Shengchu, chief of the China Coal Information Institute.

In a speech delivered on Monday in St Petersburg while attending the Group of Eight summit, President Hu Jintao called for international communities to step up cooperative efforts to develop clean coal technology.

Huang said China had been cooperating with South Africa and the United States in piloting and promoting clean coal technology in China. Air emissions of sulfur dioxide and oxides of nitrogen associated with coal-burning could be significantly reduced by liquefying coal, Huang said.

Hu Yuhong said the state-owned Shenhua Group, a pioneer in developing the coal-to-liquid (CTL) business in China, had earmarked 25 billion yuan (US$3 billion) for clean coal technology. Last week, Shenhua signed an agreement with Royal Dutch Shell and South Africa-based Sasol to build two CTL plants in the Ningxia Hui autonomous region in northwestern China.

Producing clean fuels through coal liquefaction is a strategic solution to offsetting China's shortage of petroleum and balancing the country's energy structure, Cui said in his energy development report.

Statistics show that China's nationwide stock of coal reached 152 million tons at the end of last month, increasing by 8.8% or 12.26 million tons from the beginning of the year.

The coal inventory of producers was 40 million tons, up 38.2% or 11.06 million tons from the beginning of this year.

A survey shows that when the coal inventory across the country is less than 120 million tons, coal supplies will be in short supply; if the stock exceeds 150 million tons, coal will be in oversupply.

The above statistics indicate that coal overproduction is on the horizon after the overcapacity in 1998. Industry insiders note that the 1998 coal overcapacity was due to the decline in demand resulting from the Asian financial crisis.

However, the current coal overcapacity lies on the supply side. The growth of supply has greatly exceeded that of demand.

(Asia Pulse/XIC)

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