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BIZCHINA / Center

Foreign coal firms to profit more

(Xinhua)
Updated: 2007-09-24 10:24

Foreign companies that own clean coal technologies and work with their
Chinese counterparts to tap China's coal reserves, one of the world's
largest, may get good returns as China is seeking to reduce the
greenhouse gas emissions and ease its increasing thirst for oil.

"In the coming five years, China will make major advances in rational
utilization of coal. Foreign companies willing to invest in China would
gain big profits with a small capital," says Chinese Commerce Minister Bo
Xilai.

Bo made the prediction during the first China (Taiyuan) International
Coal and Energy New Industry Expo 2007 last week.

In fact, several big-name foreign companies, such as Royal Dutch Shell
Plc, South Africa-based Sasol Ltd, General Electric (GE), ABB Group and
Siemens AG, have worked with Chinese companies to produce electricity and
substitutes for crude oil derivatives from coal.

Once proved feasible industrially and commercially, large coal chemical
projects involving about US$6 billion of investment are expected to start
in China's coal-rich western regions, including Ningxia, Shaanxi and
Shanxi, according to local economic planning agencies.

Sasol Ltd, which has commercially-proven coal-to-liquids (CTL)
technology, a sort of indirect liquefaction technology, planned to
develop two CTL plants in cooperation with China's Shenhua Ningxia Coal
Group (SNCG) and Shenhua Coal Group, each with a capacity of about 3
million tons of coal-turned oil per year.

The company and its Chinese counterparts are carrying out feasibility
studies, said Chen Liming, executive vice president of Sasol China. The
projects would become demonstration projects during China's 11th
five-year plan period that ends in 2010.
Shenhua Group, China's largest coal company, has said it would produce
the country's first barrel of liquid fuel from coal in 2008 in Erdos of
Inner Mongolia, using self-owned technology known as direct coal
liquefaction.

"There are no impassable obstacles in developing technologies for
converting coal into oil, but the effect of such technologies should be
tested with small trial operations because they cost much money and call
for sound risk-control abilities," said Zhang Yuzhuo, who is in charge of
Shenhua's coal liquefaction business.

Royal Dutch Shell Plc, Europe's second-biggest oil company, and SNCG have
agreed to study the feasibility of a plant in China with a daily capacity
of 70,000 barrels.

Siemens has also signed an agreement with SNCG to provide key
gasification equipment for a coal-based dimethyl ether (DME) project,
with a planned annual production of 830,000 tons.

Coal already provides up to 70 percent of China's energy needs, mostly
for the power sector and steel industry. Meanwhile, oil imports have been
increased to fuel China's booming economy, spurring the nation to look
for technologies that can turn some of its coal reserves into fuel and
other chemicals.

"We are under much pressure in oil supply," said the Chinese commerce
minister.
Development and application of clean coal technologies have been
described as key areas in the 11th five-year plan for the country's coal
industry.

"For a country rich in coal resources like China, the CTL industry would
be encouraged by the government," said Chen, adding that direct and
indirect liquefaction technologies should not be simply compared with
each other as they have different evolution paths.

Like Shenhua, many Chinese coal companies are keen to develop plants to
make liquid products. But the Chinese government raised the threshold for
coal to liquid fuel projects last year, for fear that excessive
development of the fossil fuel would pollute the environment and strain
water supply.

At the expo, GE caught much attention for its "Integrated Gasification
Combined Cycle (IGCC)", a cleaner coal solution significant for improving
power generation in China.

The IGCC allowed gasification of low-cost hydrocarbons, like coal, into a
value added, natural-gas-like fuel called synthesis gas to fuel a
combined cycle system, according to Darryl Wilson, vice president and CEO
of GE Consumer and Industrial Asia.

Wilson said this solution would increase fuel diversity and reduce
emissions.

Foreign companies have also joined China's efforts of tapping coal-bed
methane.

During the Second U.S.-China Strategic Economic Dialogue, the two nations
nailed down plans to develop 15 large coal-bed methane capture projects
involving six US companies and China United Coal-bed Methane Corporation,
the only company in China authorized by the government to cooperate with
foreign partners in coal-bed methane mining and development.

(For more biz stories, please visit Industry Updates)

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