Coal-to-olefins technology leaps forward in China

China's coal plan

19 February 2010 21:58  [Source: ICB]

China's rapid industrial growth needs feedstocks. While the giant nation has minimal petroleum and natural gas reserves, it has plenty of coal

THE RESUMPTION of a $10bn (€6.7bn) coal-to-olefins (CTO) project in China between the US-based Dow Chemical and China's largest coal mining company, state-run Shenhua Group, shows that the mighty Asian nation is more than willing to utilize new technologies to maintain its economic and industrial growth.

Although third in global coal reserves, after the US and Russia, China is the world's leading user and producer of coal, according to the US Energy Information Admin-istration (EIA), digging over 3bn short tons (2.7bn tonnes) of coal in 2008 - up from 2.1bn tons in 2005, and 2002's 1.4 bn tons.

Half of the coal dug up is for nonpower related industrial uses, says the EIA, and Chinese coal production is projected to increase at a rate of 10-15%/year.

China is estimated to have 120bn tons of coal, enough to last 75 years if consumption rates remain steady. The nation is significantly leveraging its coal-to-chemicals (CTC) options in a number of product areas, including methanol, olefins, acetylene-carbide polyvinyl chloride (PVC), ammonia/urea, as well as aromatics, says US-based consultancy Chemical Market Associates Inc. (CMAI).

"In addition to the upstream integration, the CTO plants are integrated to downstream derivatives of polyethylene [PE] and/ or polypropylene [PP]," says Dewey Johnson, CMAI's global business director - syngas chemicals. "If successful, these technologies enable China to advance its initiatives toward self-sufficiency and globally competitive technology."

 
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THE YULIN PROJECT
In 2004, Dow Chemical, of the US, and Shenhua began evaluating whether the two companies could work on a CTO project, and in 2007, the companies signed a cooperation agreement.

In December Dow CEO Andrew Liveris said: "With the Rohm and Haas integration, the Asia-Pacific region holds a position of even greater importance within Dow's global landscape, accounting for 13% of our global revenue and featuring megaprojects expected to significantly elevate our capability and competitiveness in the next decade."

Although the two companies have been tight-lipped regarding their plans, in November 2009,executives from both companies attended a ground-breaking ceremony in Yulin, Shaanxi province, as well as representatives of the Chinese government and staff from the US embassy.

The attendance of embassy personnel is significant: A couple of weeks later, in mid-November, at the opening of the new US-China Clean Energy Research Center, US President Barack Obama and Chinese President Hu Jintao pledged to work to promote and develop clean coal usage, including the increased use of coal gasification.

The Dow/Shenhua CTO facility is called the Yulin Integrated Chemicals project, and is scheduled to start in 2016. Sources in November said that Shenhua and Dow would likely form a 50:50 joint venture around the massive complex, expected to be the world's largest CTC project.

The complex, which would be located in the Qing Shui Gou area of the Yu Shen Industrial Zone, would have 23 production units, auxiliary projects, supporting facilities and storage devices, says ICIS news.

Included at the facility will be a 3.32m tonne/year methanol plant, a 1.22m tonne/year methanol-to-olefins (MTO) unit, a 400,000 tonne/year monoethylene glycol (MEG) plant, a 210,000 tonne/year ethanolamines/ethylenediamines facility, a 340,000 tonne/year polyether polyols unit and a 150,000 tonne/year acrylic acid facility.

Also at Yulin will be a 200,000 tonne/year acrylic ester plant, a 200,000 tonne/year chlorinated methanes unit, a 510,000 tonne/year ethylene dichloride/vinyl chloride monomer (VCM) plant and a 500,000 tonne/year PVC plant. At the sidelines of January's World Economic Forum (WEF), Liveris told reporters that China has created "amazing" new demand, and praised the government's investment in infrastructure.

"We see China as a manufacturing economy that has entered the world stage," he said. "It's obviously geared towards exports, but increasingly to local consumption."

Also attending the WEF meeting was the chairman of Shenhua, Zhang Xiwu, who added: "With rich energy and mineral resources and good infrastructure for coal, natural gas, oil and salt, Yulin is an important energy and chemicals base for China with huge growth potential."

MEGA POTENTIAL
Meanwhile, Dow and Shenhua are conducting a feasibility study, and the approval process has begun. Neither company can discuss specifics of the deal yet, but Chris Chan, Dow's public affairs director for Asia-Pacific manufacturing, engineering and megaprojects, says, "The Yulin Integrated Chemicals project will incorporate the latest in chemical process technology to ensure a sustainable, worldscale chemical production facility."

Resource conservation is a key design principle, Chan adds, with plans to optimize use of natural resources, like coal, salt and water, and minimize the environmental footprint as well as reduce greenhouse gas emissions.

While coal mining has become the bete noire of environmentalists in North America and Western Europe, most of China's coal is deep underground, so extraction tends not to be as environmentally disruptive and attention-grabbing as the strip mining that is more common in Europe and the US.

"While China continues to advance its overall health, safety and environmental policies, implementation of improved policies [is] not likely to become an impediment to China's long-term strategy of diversifying chemical feedstocks to this domestically abundant resource," says Johnson.

These facilities are unique - the CTO plants in China will use technology that will be implemented at commercial scale for the first time, notes Johnson. "While the capital cost of these plants [is] relatively high, the operating costs will be very low, and the units will be very competitive with naphtha-based steam cracker complexes, as well as most imports of olefin derivatives," says the analyst.

These CTO facilities will be integrated into coal at the mouth of the mines. This will, Johnson says, benefit from the continued energy spread between global oil prices and China coal prices. He adds that the most recent five-year energy spread between Dubai Crude and China coal gives China an average advantage of $7/MMBtu.

The Dow and Shenhua Yulin complex will not be the only project tackling CTO options. According to CMAI, there are several MTO/methanol-to-propylene (MTP) plants in the pipeline in China, with three major projects expected on stream in the first half of 2010, two of which are from Shenhua subsidiaries.

Baotou Shenhua will have capacities of 2m short tons/year of coal to MTO, 260,000 short tons/year of methanol-to-ethylene (MTE), and 260,000 short tons/year of MTP. Shenhua Ningmei will have capacities of 1.96m short tons/year of coal to MTP, and 260,000 tons/year of MTE.

Datang International Power is building an MTP plant, integrated back to coal producing 1.7m short tons/year of methanol to produce 500,000 short tons/year of propylene and production to PP.

But others are not so sanguine: A representative of US-based Eastman Chemical, which has been using coal gasification since 1983, says: "We believe MTO to be a viable technology choice for olefins production in some regions, particularly in China, but we do not see this technology having a major impact on other regions or on the global markets for olefin derivatives."

For the latest energy news, visit ICIS Heren


By: Ivan Lerner
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