China has raised the capital threshold for projects converting coal to liquid
fuel to brake a possible overheating in the coal-chemical industry, as excessive
development of the fossil fuel pollutes the environment and strains the water
supply.
On July 7, 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 before the national development
program for the coal liquefaction industry is complete.
The government will not approve coal liquefaction projects with an annual
production capacity under three million tons, said the Commission circular.
One ton of coal-to-oil processing capacity needs an investment of 10,000 yuan
(1,250 U.S. dollars). Thus the three-million-ton annual capacity means an
investment of 30 billion yuan, an astronomical figure for most enterprises, said
Li Dadong, an academician with the Chinese Academy of Engineering.
"The move aims to contain possible overheating and ensure a healthy
development of the coal liquefaction industry across the country," he said.
The world's largest producer of coal, China fuels about 70 percent of the
energy needs for itself.
Constantly rising oil prices have prompted the coal chemical industry to try
to find alternatives for petroleum in China, the world's fourth-largest economy.
The recent oil rally toward 80 U.S. dollars a barrel has further spurred a wave
of coal liquefaction projects.
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 part of the 20th
century but later application was hindered by the relatively low price and wide
availability of crude oil and natural gas.
Large-scale applications have existed in only a few countries, such as
Germany during World War II and South Africa since the 1960s. The oil crises of
the 1970s and the threat of depletion of conventional oil supplies sparked a
renewed interest in the production of oil substitutes from coal during the
1980s. However, the wide availability of inexpensive oil and natural gas
supplies in the 1990s effectively ended the near-term commercial prospects of
these technologies.
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