China powers ahead
By Nao Nakanishi and Niu Shuping | 2008-7-16 | NEWSPAPER EDITION
shanghaidaily.com
AS world oil prices continue to skyrocket, China is about to unveil an alternative fuel source, write Nao Nakanishi and Niu Shuping.
With oil prices at historic highs, China is moving full steam ahead with a process to turn its vast coal reserves into barrels of oil.
Known as coal-to-liquid (CTL), the project of obtaining oil from coal and being fuel self-sufficient is enticing to coal-rich countries seeking to secure their energy supply in an age of increased debate about how long the world's oil reserves can continue to meet demand.
The United States, Australia and India are among those countries looking at CTL technology. And China is building a major complex on the grasslands of Inner Mongolia.
"The countries with large coal reserves like South Africa, China or the United States are very keen on CTL as it helps ensure energy security," says Yuichiro Shimura from the Mitsubishi Research Institute Inc in Tokyo.
In Erdos, Inner Mongolia, about 10,000 workers are putting the final touches to a CTL plant that will be run by the state-owned Shenhua Group, China's biggest coal mine.
The plant will be the biggest outside of South Africa, which adopted CTL technology due to international embargoes on fuel during the apartheid years.
"We cannot fail," says Zhang Jiming, deputy general manager at Shenhua Coal Liquefaction. "If things go smoothly, we will start with the expansion next year."
The plant will start operating later this year and is expected to convert 3.5 million tons of coal a year into a million tons of oil products, such as diesel for cars.
That is the equivalent of about 20,000 barrels a day, a tiny percentage of China's oil needs as oil consumption in the country is around 7.2 million barrels a day.
If all goes well, Inner Mongolia will push on with an ambitious plan to turn half of its coal output into liquid fuel or chemicals by 2010. This would be around 135 million tons, or about 40 percent of Australia's annual coal output.
The region, as big as France, Germany and England altogether, hopes CTL will propel development while contributing to Beijing's plan to have CTL capacity of 50 million tons by 2020.
That would be about 286,000 barrels a day, or about 4 percent of China's energy needs based on current consumption.
CTL is also being considered by the United States, the world's largest coal reserves. The relatively low cost of CTL produced oil given current oil prices, plus the chance to be more energy self-sufficient is a powerful incentive.
The technology is being seen in some quarters as offering an opportunity for the US to reduce its dependency on other countries for oil and a small CTL industry is emerging there.
But CTL is also highly controversial. Experts say the whole lifecycle releases about twice as much carbon dioxide, the most common greenhouse gas, as fossil fuel.
The fuel produced through this method has a shelf life of up to 15 years, unlike other motor fuels which is attractive to the military and to governments keen to ensure fuel security.
Though CTL technology was developed about 100 years ago, it has been little used. But oil prices, which have more than quadrupled this decade to above US$140 a barrel, have reignited interest.
The Oil and Gas Journal in April suggested it costs US$67 to US$82 a barrel to produce CTL fuel, based on the experiences of South Africa's Sasol.
China's Shenhua will be the first to use direct CTL technology on a large scale. It is different from indirect CTL, proven by South Africa's Sasol, and converts coal directly into liquid fuel, skipping gasifying coal into syngas.
"CTL happened only twice in world history, and both times it's been in nations facing emergency with respect to energy. It should sound an alarm bell," says Gary Kendall from the World Wildlife Foundation conservation group.
"There are two defining issues in the 21st century: one is carbon dioxide and one is water ... and the (CTL) process is horrifically carbon intensive. It is also very water intensive," he says.
The "holy grail" for CTL enthusiasts is to find a way to turn coal into liquid without releasing carbons into the air. The idea is that the carbon dioxide, the main global warming gas, would be captured and stored deep underground.
Coal lobbyists in the US have been clamoring for more research into CTL, but they have failed to override environmental concerns due to the carbon emissions of the process.
China's Shenhua and South Africa's Sasol are conducting a feasibility study to build two more CTL plants in Shaanxi Province and Ningxia Hui Autonomous Region.
Whether CTL technology could ever be used on a large scale will depend on how coal companies deal with the massive amount of water used in the process.
China faces serious water shortages and ground-water levels are sinking every year. So Shenhua plans to use ground water and recycled water from coal mines to supply the 8 million tons it will need a year.
Yet Shenhua's Zhang says it would need to tap other sources, such as the Yellow River, in the second phase.
But environmentalists say that rather than invest in a process that will probably never be environmentally sound, countries should move towards running cars on batteries rather than liquid fuel.
"If you turn coal into electricity at high efficiency, and charge electric vehicles, you can get three times as many kilometers per unit of coal," says WWF's Kendall. |
