Publication Date: December 20, 2011 Source: China Communications Focus
Yankuang Coal-to-Liquid (CTL) project, which has been under application for quite some time, recently joined the coal clean comprehensive utilization demonstration project in Yulin, China's first energy megacity. It perfectly combined with multiple integrated projects related to coal, electricity, gas, chemicals, and specialized new energy vehicles, forming China's first array of coal clean comprehensive utilization led by independent intellectual property rights.
Ten years of sharpening a sword. CTL is Yankuang Group's longest-developed and largest-investment project ever. From starting the project in 1998 to completing the pilot test of a 10,000-ton scale facility in 2007, Yankuang became the only enterprise in China independently developing and mastering the core technology of coal-to-liquid. The Shanghai CTL R&D Center and the Lu Hua pilot facility alone cost nearly 1 billion yuan. After continuous improvement, the core technologies including the novel water-coal slurry gasification processing 2,000 tons per day, million-ton level coal indirect liquefaction and co-production with electricity, 100,000-ton level low-temperature Fischer-Tropsch synthesis oil, and multi-integrated production based on coal gasification have maintained a leading position domestically and advanced globally. In September 2006, the National Development and Reform Commission issued a "Notice on Relevant Issues Regarding Coal Liquefaction Work," requiring all regions to suspend approval of coal liquefaction projects. However, Yankuang Group's coal indirect liquefaction technology was included in the national "863" plan, allowing the project application to proceed smoothly.
Yankuang Group's CTL project is almost entirely market-oriented, with funds completely self-raised. The pressure of huge initial investments is significant, and more needs to be done to bring this attractive project to fruition. Sun Qiwen, Vice General Manager of Yankuang Group and concurrently General Manager of Shanghai Yankuang Energy Technology Research Co., Ltd., told reporters that if the Yankuang coal-to-oil project reaches an annual output of 10 million tons of oil products, it will require an investment of 100 billion yuan. If divided into two phases, the first phase would produce 5 million tons of oil products, requiring 50 billion yuan. Among these, the preliminary demonstration project includes a production line producing 1 million tons of oil products annually, plus initial factory and other supporting facilities totaling about 12 billion yuan.
A well-informed person familiar with the development process at Yankuang frankly admitted that when the pilot scale of 10,000 tons is expanded 100 times, costs increase significantly. Moreover, prices of various raw materials are rising, meaning what used to cost 10 billion yuan might now cost 14 or 15 billion yuan, increasing the project’s risks and uncertainties.
Bold commitment to CTL and deep understanding of its risks foster innovative financing ideas. Wang Xin, Chairman of Yankuang Group, said: As a market-oriented project, CTL must leverage the advantages of multi-integrated production and pursue diversified investment routes. Cooperation with enterprises both domestically and internationally that complement each other in terms of capital and technology should be sought. Ultimately, listing through maximizing comprehensive utilization benefits should be pursued.
The "large regional layout, large project planning, large group leadership, large cluster promotion, large ecological construction" development pattern of Yulin's energy chemical industry provides a stage for Yankuang's innovative thinking. The Shaanxi Provincial Party Committee and Provincial Government decided to create the Yulin Horizontal Coal Clean Comprehensive Utilization Demonstration Project, including a 10-million-ton-per-year mine, a first-phase 1-million-ton-per-year coal indirect liquefaction industrial demonstration facility, and an annual production of 50,000 new energy special vehicles. By integrating China's self-owned intellectual property coal clean comprehensive utilization technology, it accelerates the high-end development of the northern Shaanxi energy chemical base's chemical industry, presenting a new development opportunity for Yankuang's CTL.
Facing new opportunities, Yankuang reorganized its structure and established the diversified investment Shaanxi Future Energy Chemical Co., Ltd. In the registered capital of 5.4 billion yuan, Yankuang Group invested 2.7 billion yuan holding 50% equity; Yanzhou Coal Mining Company invested 1.35 billion yuan holding 25% equity; Shaanxi Yanchang Petroleum Group invested 1.35 billion yuan holding 25% equity. The company operates chemical products, oil products, as well as coal production and sales, and participates in investing in Yankuang Group's CTL projects developed in Shaanxi Province.
After the debut of Shaanxi Future Energy Chemical Co., Ltd., strong joint measures were launched. On December 6, a gas supply procurement contract was signed with Air Products and Chemicals Inc. (APCI), a global leader in industrial gases and fine chemicals listed on the New York Stock Exchange, maintaining stable gas supply relationships with international steel companies such as POSCO in South Korea and Nippon Steel in Japan. This collaboration marks the first combination of Western advanced air separation units with the best low-temperature Fischer-Tropsch synthesis coal-to-oil technology from the East, providing a demonstration for China's development of the coal clean comprehensive utilization industry. Mr. John McGlade, Global Chairman and CEO of APCI, expressed optimism about cooperation with Yankuang, stating that APCI's finest technology and experience would be applied to the cooperative project to ensure success. He also hoped for deeper and broader future cooperation with Yankuang.
The Yulin Horizontal Coal Clean Comprehensive Utilization Demonstration Project not only enables Yankuang's CTL to early join the comprehensive utilization express train towards the market but also makes it particularly charming in the "two complete one beautiful" new family:
Yankuang's coal chemical self-owned intellectual property technology takes the full role. The project implements co-production of coal, electricity, gas, oil, and chemical products, making Yankuang's multi-integrated advanced technology based on coal gasification appear comprehensively before the public for the first time. Led by self-owned intellectual property technology, it collaborates with foreign advanced enterprises, forming a technically advanced cluster of coal clean comprehensive utilization.
Four major categories of new-type coal chemical products are fully equipped. The project's chemical product scale is 10 million tons of coal per year; the first phase produces 1.1 million tons of coal indirectly liquefied oil and chemical products annually, including 76% diesel, 20% naphtha, 3.1% liquefied petroleum gas, 0.9% specialty wax, and other chemical products like dimethyl ether. Thus, the four major products of new-type coal chemicals—methanol, coal-to-natural gas, coal-to-oil, and dimethyl ether—are all launched. Especially, the coal-to-natural gas supports the development of the accompanying SAIC-GM-Wuling Yulin Dongfang new energy vehicle manufacturing project, planning to produce 50,000 new energy special vehicles by 2015, generating over 18 billion yuan in revenue and creating employment for 5,000 local people. The project is implemented in two phases, with the first phase building a production capacity of 20,000 new energy special vehicles, mainly including assembly workshops, debugging and testing workshops, test tracks, parking lots, and public supporting facilities.
Low-carbon emission reduction environmental beauty. The multi-integrated technology cluster achieves 99.9% CO2 recovery, over 99.5% H2S recovery, 100% comprehensive utilization of chemical waste residue, zero wastewater discharge with over 90% closed-loop recycling, demonstrating the development of China's self-owned intellectual property coal clean comprehensive utilization projects.
Currently, the basic design of the energy chemical engineering, including CTL, has completed 80% of the total amount, and detailed design has reached 25%. As a supporting mine for the coal clean comprehensive utilization demonstration project, the Jinchitaban Mine mining right transfer contract has been signed, and three shafts have already started construction. The mine's designed recoverable reserves are 1.04 billion tons, with an annual designed production capacity of 8 million tons and a total construction period of 31 months. The mine area has obvious location advantages, located in the center of the Yulin Shenfu mining area, adjacent to the Shenyan railway, Yulin Shenfu expressway, and Provincial Road 204, with extremely convenient transportation.
Speaking about the future prospects of the project, Sun Qiwen, Vice General Manager of Yankuang Group and General Manager of Shaanxi Future Energy Chemical Co., Ltd., optimistically stated that due to the lower mining costs in Shaanxi, every ton of oil requires 4.2 tons of coal, and the cost of each ton of finished oil is roughly equivalent to the import price of crude oil at $50 per barrel. Additionally, there are other chemical products like natural gas and dimethyl ether. Considering the trend of international crude oil prices, it is unlikely to fall below $50 per barrel. Meanwhile, multi-integrated comprehensive utilization greatly reduces the industrial risks of CTL, enabling "coal-to-oil" to not only play a strategic role in ensuring national energy security but also bring predictable billions in business opportunities for the enterprise.