Towering above the sweeping grasslands of Erdos, in north
China's Inner Mongolia Autonomous Region, two 60-meter-high
cylindrical structures stand out againstthe skyline.
The structures -- reactors for liquefying coal -- are part of
aproject to mass produce desperately needed fuel oils from China's
rich coal resources.
More than 10,000 workers from across China are constructing
themassive project, the first industrial facility in Ejin Horo
"The project is in its final stage of construction and will
start production late in the year," said Wang Yulong, deputy
manager in charge of the coal liquefying arm of the Liquefied
CoalOil Company of Shenhua Group Corporation Limited, the country's
top coal producer.
Coal liquefaction is a process that converts coal from a solid
state into liquid fuels, usually to provide substitutes for
petroleum products. Coal liquefaction processes were first
developed in the early years of the 20th century but progress was
hindered by the relatively low price andwide availability of crude
oil and natural gas.
The facility in Erdos will produce mostly diesel oil, plus
liquefied petroleum gas (LPG), naphtha (a volatile, flammable
liquid hydrocarbon mixture), and hydroxybenzene.
On completion, it will be the largest facility in the world
producing liquids from coal using a technology known as direct
"Unlike South Africa's Sasol which produces transport fuel
fromcoal in several stages, our project in Erdos will produce
liquids from coal directly," said Wang, who remained tight-lipped
about the technology his company is using.
Indirect liquefaction, the technology used by Sasol, calls for
gasification of the coal in the first place, purification of the
gaseous raw material before reaction takes place, and a series of
adjustments to the proportion of hydrogen and oxygen monoxide
before liquids can be produced.
Listed as a key state projectto help deal with China's petroleum
security concerns, the massive Erdos coal liquefaction facility
began construction in August 2004 with the blessings of China's top
During an inspection tour inJune 2006, Chinese Premier Wen
Jiabao called the project a major scientific and technological
With a budget of 12.3 billion yuan and an annual production
capacity of five million tons of oil, the project will be completed
in two stages. In the first phase, three production lines will be
"We're installing the first production line and its
infrastructure," said Wang. "On completion, the line will be able
to process annually 3.45 million tons of coal into 1.08 million
tons of oil, including 720,000 tons of dieseloil."
Before starting the project, Shenhua successfully trialled
technology ata specially built converter in Shanghai, according to
"The project in Erdos is about 1,000 times the size of the
Shanghai model," said Wang, claiming it would be both
environmentally friendly and lucrative.
Preliminary estimates show 3.4 to 3.5 tons of coal could produce
a ton of oil, and if the price of a barrel of crude remains above
35 U.S. dollars, the facility will be profitable, said Wang.
The coal liquefaction project is big on recycling. Workers have
constructed two 100,000-kw power plants for generating electricity
from burning grease stain, and a sewage treatment plant that will
go into servicein October.
Industry observers say the Erdos project is significant to
China'sfood and energy security.
"The efficiency of conventional coal use is very low, but the
profits from coal-oils can be much higher," said an expert surnamed
Wu. "This takes away the need to process grain such as maize into
Shenhua Group Corporation Limited is a 100 percent state owned
venture that came into being in 1995. Its scope of business ranges
from coal, power, heat, coal-liquefied oils, coal-based chemical
industries and railways to ports.
It produced 203 million tons of coal last year and was the first
enterprise whose coal output exceeded 200 million tons in
Coal accounts for more than 84 percent of China's energy
reserves. Statistics provided by the Land and Resources Bureau of
Inner Mongolia Autonomous Region show that proven coal reserves in
the region exceed 500 billion tons, doublethat of Shanxi Province
and elevating Inner Mongolia to the top rank in China in terms of
Many believe coal-to-liquid projects are the most practical way
for China to achieve self reliance in oil supply.
In the meantime, constantly rising oil prices have prompted the
coal-based chemical industry to flourish in a bid to find
alternatives for petroleum in China, the world's fourth-largest
Oil prices in the international market currently hover around 70
U.S. dollars a barrel.
To avoid a possible overheating in the coal-based chemical
industries, however, China raised the threshold for projects
converting coal to liquid fuel last year, for fear that excessive
development of the fossil fuel will pollute the environment and
strain water supply.
OnJuly 7, 2006, the National Development and Reform
Commission(NDRC), China's industrial watchdog, issued a circular
requiring local governments to tighten control of new coal
liquefaction projects prior to the completion of the national
development program for the coal liquefaction industry.
The government will not approve coal liquefaction projects with
an annual production capacity under three million tons, said the
(Xinhua News Agency June 22, 2007)