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China Coal-To-Olefins: Water Not An Issue

China, Company Strategy, Economics, Environment, Methanol & Derivatives, Oil & Gas, Olefins, Polyolefins
By John Richardson on 07-Jul-2014


By John Richardson

CONVENTIONAL wisdom has it that the water issue stands in the way of the growth of the coal-to-olefins (CTO) industry in China.

The process consumes a lot of water  – between 15-20 tonnes for every tonne of olefins produced – which compares with 0.80-2.17 tonnes of water for every tonne of oil processed through a refinery, we have been told.

This might not be an issue if it wasn’t for the fact that most of the CTO  projects are located in north and northwest China where water is in tight supply, the blog has repeatedly been told.

We have also been told, time and time again, that the methanol-to-olefins (MTO) stage in the production process is commercially unproven and so production levels are likely to remain well below nameplate capacities (coal is first of all turned in synthesis gas and then methanol before conversion into olefins).

What if this conventional view is completely wrong? What might this mean for global olefins supply and demand balances?

“China’s government has been telling us for years that there is no issue with water consumption in CTO and we believe them,” said a source with a global petrochemicals producer.

“Water  consumption in CTO is only an incredibly small percentage of total amount of water used in coal-related industries in general – some 0.5%.

“Turbines in coal-fired power stations are the biggest consumers by of water in the coal value chain because they are often cooled by water. This is a very easy to solve and is being solved through switching to cooling turbines with air.”

Solving the water issues surrounding coal is a lot easier than the alternative for China – becoming ever-more dependent on oil and gas imports, he adds.

Coal has far more important uses than chemicals production, as the chart above reminds us.

Increased production of gasoline, diesel and jet fuel made from coal will help reduce China’s dependence on imported crude.

Synthetic natural gas is a substitute for natural gas imports, that come either by pipeline or via liquefied natural gas (LNG) tankers.

And synthetic natural gas ticks another box as it generates less carbon dioxide and particulate emissions than coal when it is used in power plants.

Another very important box will be ticked by making more diversified use of China’s abundant coal reserves as an energy source: Job creation.

Big new integrated sites will therefore produce transportation fuels, synthetic natural gas and chemicals etc. on a scale far greater than most overseas observers realise, adds our source.

“As for the argument that the MTO process is commercially unproven, this is just nonsense.  China has several proven MTO processes that work extremely well,” he says.

Olefins additions via coal will be so big over the next decade that there will be no incremental increases in China’s ethylene and propylene equivalent imports, he adds.

In other words, imports will remain stuck at roughly where they were in 2013. During that year, China imported 15.03m tonnes of ethylene equivalent and 6m tonnes of propylene equivalent, according to ICIS Consulting.

So much, perhaps, for the argument that slow development in China’s CTO industry will leave lots of room for US ethane-based cracker projects.