Strong Growth of China’s Natural Gas Demand Promotes Coal-to-Gas Sector Development
Year:2013 ISSUE:24
COLUMN:ORGANICS
Click:205    DateTime:Jan.06,2014
Strong Growth of China’s Natural Gas Demand Promotes Coal-to-Gas Sector Development

By Sang Jianxin, China National Chemical Information Center

1. Ten approved projects in China

In the 1970s, due to the prices of oil and gas rising continually, companies in countries like the United States and Germany accelerated R&D in coal-to-natural gas technology and conducted experiments with coal-to-natural gas technologies. Pilot plants built in Germany, South Africa and the United States achieved gratifying results. However, due to a drop in oil prices, these plants could not make money and were shut down.
In 2012, China completed the construction of two projects – Datang International Keshiketeng Coal Gas Co., Ltd.’s first phase 1.35 billion m3/a project and Xinjiang Qinghua Coal Chemical Co., Ltd.’s first phase 1.35 billion m3/a project. At present, the world’s coal-to-natural gas capacity has reached 3.9 billion m3/a.
China has ten approved coal-to-natural gas projects with a total capacity of 93.5 billion m3/a (see table 1). Of these, the two projects with the fastest progress are projects of Datang International Keshiketeng Coal Gas Co., Ltd. and Xinjiang Qinghua Coal Chemical Co., Ltd. As of December 2012, China completed the construction of two projects with a combined capacity of 2.7 billion m3/a – Datang International Keshiketeng Coal Gas Co., Ltd.’s first-phase 1.35 billion m3/a project and Xinjiang Qinghua Coal Chemical Co., Ltd.’s first-phase 1.35 billion m3/a project. The first-phase unit of Datang International Keshiketeng Coal Gas Co., Ltd. had run through the whole process flow by the end of July 2012; its second-phase project has been under construction, and is planned to supply natural gas to Beijing in early 2014. The first phase 1.35 billion m3/a project of Xinjiang Qinghua Coal Chemical Co., Ltd.’s 5.5 billion m3/a coal-to-natural gas project was completed by the end of 2012, produced qualified natural gas in June 2013, and the natural gas produced was transmitted into the West to East Gas Transmission Pipeline on August 20. Xinjiang Qinghua Coal Chemical Co., Ltd.’s first phase project was planned to realize full load operation by the end of 2013.
In the next five years, China’s coal-to-natural gas sector will enter a period of rapid development. In addition to the state-approved projects, the local enthusiasm for investing in coal-to-natural gas projects is very high in some regions, so there are some projects that have not been approved. As of the end of 2012, according to incomplete statistics, China had more than 40 coal-to-natural gas projects (including the projects that are completed, under construction, approved and waiting for approval) with a total capacity of 190.25 billion m3/a. Besides the approved projects, construction on Inner Mongolia Hulunbeier Huaneng Yimin Coal and Electricity Co., Ltd.’s 6.0 billion m3/a project and Xinwen Mining Group (Yili) Energy Development Co., Ltd.’s 2.0 billion m3/a project also started, and the projects are mainly distributed in Xinjiang and Inner Mongolia. Xinjiang, an important region for the development of coal-to-natural gas, has around 30 coal-to-natural gas projects being built or planned for construction, with a total capacity of over 100.0 billion m3/a. The total capacity of coal-to-natural gas projects being built or planned for construction in Inner Mongolia is 40.0 billion m3/a.

Table 1   China’s Approved Coal-to-Natural Gas Projects

Company     Capacity (billion m3/a)    Location     Total investment (RMB billion)    Ground-breaking???    Startup time (expected)
Datang International Power Generation Co., Ltd.    4.0    Fuxin of Liaoning province    24.57    Mar. 2010    2013
Datang International Keshiketeng Coal Gas Co., Ltd.    4.0 (1.35 for the first phase)    Keshiketeng, Chifeng of Inner Mongolia     22.8    May 2009    By the end of 2013
Inner Mongolia Huineng Coal Chemical Co., Ltd.    4.0 (1.6 for the first phase)    Yijinhuoluo, Erdos of Inner Mongolia    13.55 for the first phase    Aug. 2010    2013
Xinmeng Group    4.0    Erdos of Inner Mongolia    18.7    Oct. 2011    Oct. 2014
Nileke Energy Chemical Co., Ltd. of Guodian Pingzhuang Coal Group     10.0(4.0 for the first phase is divided by two batches)    Xinganmeng of Inner Mongolia    65.0 (26.8 for the first phase)    Jun. 2011    2015 (first batch of the first phase)
Xinjiang Branch of China Power Investment Corporation     3×2.0    Huocheng County of Xinjiang    26.3    Nov. 2011    2015 (4.0 billion m3/a)
Xinjiang Qinghua Coal Chemical Co., Ltd.    5.5 (1.35 for the first phase)    Yining county, Xinjiang Yili Kazak Autonomous Prefecture     27.8    2009    2012 (phase I)
Sinopec Xinjiang Energy Chemical Co., Ltd.    30.0 (8.0 for the first phase)    Urumqi of Xinjiang    70.0 for the first phase    Apr. 2013    Aug. 2017
CNOOC/Datong Coal Mine Group    10.0 (4.0 for the first phase)    Datong of Shanxi province    30.0 for the first phase    Jun. 2009    2014
Beijing Enterprises Group/CNOOC New Energy Investment Co., Ltd./Hebei Construction & Investment Group    3×4.0    Erdos of Inner Mongolia    25.0 for the first phase    Jul. 2013    2015
Total     93.5 ( 31.6 for the first phase)         323.72        


Table 2   China’s Production of Coal-to-Natural Gas during 2012-2015

Year              Capacity (billion m3/a) Output (billion m3)    Operatingrate(%)
2012                   2.70                           -                  -
2013 (expected)           4.05                          0.2                 4.9
2014 (expected)           6.95                          2.0                28.8
2015 (expected)          65.00                         18.0                27.7



According to the plan for the development of coal-to-natural gas issued by the National Energy Administration, during 2011-2015, the coal-to-natural gas projects will be mainly distributed in four areas:
?Xinjiang,
?the “three west” region (Shanxi province, Shaanxi province and West Inner Mongolia),
?East Inner Mongolia, and
?Yunnan and Guizhou provinces.
Xinjiang currently gets special consideration under national industrial policy, especially with regard to coal chemicals. Xinjiang is to focus on the development of coal-to-gas, quickly construct coal-to-oil demonstration projects and steadily develop its coal-to-alcohol ether fuel sector. At present, around 30 coal-to-natural gas projects are being built or planned for construction there, with a total capacity of over 100.0 billion m3/a. And in Inner Mongolia, the total capacity of coal-to-natural gas projects being built or planned for construction has reached 40.0 billion m3/a.
According to the state plan and current progress of coal-to-natural gas projects being built or planned for construction, Datang International Keshiketeng Coal Gas Co., Ltd.’s second-phase project has been under construction and is planned to be completed by the end of 2013. China’s coal-to-natural gas capacity was expected to reach 4.05 billion m3/a in 2013. Datang International Power Generation Co., Ltd.’s first phase 1.3 billion m3/a coal-to-natural gas project of Fuxin of Liaoning province and Inner Mongolia Huineng Coal Chemical Co., Ltd.’s 1.6 billion m3/a coal-to-natural gas project, which were originally planned to be completed in 2013, are under construction and are hoped to be completed in 2014. It is expected that China’s coal-to-natural gas capacity will reach 6.95 billion m3/a in 2014.
According to the Plan for Natural Gas Development during 2011-2015 in China, the output of natural gas produced from coal will reach 15.0 billion-18.0 billion m3 by 2015. According to the progress of coal-to-natural gas projects being built or planned for construction, it is expected that by 2015, China’s capacity of coal-to-natural gas will reach 65.0 billion m3/a, and the domestic output of natural gas produced from coal will be 18.0 billion m3. China’s production of coal-to-natural gas during 2012-2015 is listed in table 2.

2. Strong growth of natural
gas demand in China

With the gradual improvement and development of the natural gas industrial infrastructure, China’s consumption of natural gas has increased drastically in recent years. Before 1996, due to the insufficient industrial infrastructure, the growth of domestic natural gas consumption slowed down. After 1996, with the completion of large-scale long-distance natural gas pipelines, the domestic consumption of natural gas climbed rapidly. China’s consumption growth of natural gas saw particularly rapid growth during 2006-2010. Before 2007, China’s supply of natural gas was basically meeting the domestic demand. With the gradual improvement and development of industrial infrastructure, China’s demand for natural gas has seen a strong growth in recent years. In 2007, there was a supply gap of natural gas in the domestic market, and it has climbed year-on-year. The domestic consumption of natural gas reached 107.3 billion m3 in 2010 (exceeding 100.0 billion m3 for the first time), with an average annual growth of 18.1%.

In 2012, China’s apparent consumption of natural gas reached 145.9 billion m3, however, the domestic output of natural gas was only 106.71 billion m3, so the supply gap of natural gas reached 39.19 billion m3. China’s supply and demand of natural gas during 2008-2012 are shown in table 3.

3. Mature process

The development goals of China’s natural gas sector during 2011-2015 have been basically established. The proportion of natural gas in China's energy production and consumption mix will double, while "distributed energy" becomes the development approach. During 2011-2015, China will continue to increase the proportion of natural gas in its primary energy consumption, and accelerate the construction of natural gas supporting infrastructures, especially distributed CCHP (combined cooling heat and power). It is expected that the drastic development of two big markets – power generation and natural gas-powered vehicles will also promote the significant growth of natural gas consumption. It is projected that by the end of the 12th Five-Year Plan period (2011-2015), the proportion of natural gas in China’s primary energy consumption will climb to 8%.
The front end of the process flow in coal-to-natural gas is basically the same as that in coal-to-methanol as well as coal-to-synthetic ammonia, and the three processes all include purification treatment after coal-to-gas. The difference is that in coal-to-methanol and coal-to-synthetic ammonia, the purified gas is used for the synthesis of methanol or ammonia and is required to contain very little methane, while in coal-to-natural gas, the gas is purified through a methanation treatment and required to contain much methane.
In the coal-to-natural gas process route, synthesis gas is produced using pulverized coal pressurized gasification, and through the transformation of cooling of crude coal gas, low temperature methanol purification, absorption refrigeration, methanation and drying to obtain the product. The auxiliary production lines include the recovery of phenol, ammonia and sulfur, and the treatment of waste water and residues. The major process flow is the production of synthesis gas through coal gasification, and after the carbon monoxide conversion and purification, synthesis gas is used to produce natural gas through a methanation reaction.
Coal-to-natural gas process technology is mature, and the related scholars and companies in the world are focusing their R&D on innovation in gasification technology and methanation.

Table 3   China’s Supply and Demand of Natural Gas, 2008-2012  (billion m3)

Year Output Import     Export     Apparent consumption Supply gap Ratio between output
   And apparent consumption (%)
2007  4.02   69.24    2.6         70.66                   1.42               98.0
2008 80.30    4.60    3.24     81.66                   1.36               98.3
2009 85.27   7.63  3.21        89.69                  4.43              95.1
2010 94.85  16.49  4.03       107.31                 12.46              88.4
2011 102.53 31.16  3.19       130.50                 27.97              78.6
2012 106.71 42.08  2.89       145.90                 39.19            73.1


4. Making full use of by-products

At present, China restricts the development of natural gas chemicals. To fully use the by-products of coal-to-natural gas to develop a downstream industry chain could not only improve the economic benefits of coal-to-natural gas plants, but also protect the environment. Even in the peak regulation period, the use of synthesis gas to develop chemicals has big potential and is not restricted.
(1) Making full use of coal-to-natural gas by-products
The by-products of Datang International Keshiketeng Coal Gas Co., Ltd.’s 4.0 billion m3/a coal-to-natural gas project are shown in table 4. Making full use of these by-products will improve the economics of projects.
Coal tar is a complex mixture which contains more than 10 thousand varieties of organic compounds. Of these, more than 500 varieties have already been identified and around 200 varieties can be extracted. Around 50 varieties can be extracted and have economic utility. The series products like light oil, phenol, naphthalene, washing oil, anthracene, carbazole, indole and asphalt obtained through tar processing are not only basic raw materials for producing synthetic plastics, synthetic fibers, pesticides, dyes, pharmaceuticals, coatings, additives as well as fine chemical products, but also basic raw materials in sectors such as metallurgy, synthesis, construction, textiles, papermaking and transportation. Many of these products are not available from the petrochemical industry.
Petroleum naphtha ligroin, also called crude gasoline, is a colorless transparent or slightly yellow liquid with a special smell; it is insoluble in water and has a density of 650-750kg / m3 at room temperature and atmospheric pressure. It generally consists of 55.4% paraffin, 30.3% monocyclic alkanes, 2.4% bicyclic alkanes, 11.7% alkyl benzene, 0.1% benzene, and 0.1% indane and tetralin.
Sulfur, crude phenol, middle oil and ammonium sulfate are excellent chemical raw materials, and they can be processed and utilized. To fully use the by-products of coal-to-natural gas to develop the downstream industry chain and use surplus synthesis gas (or natural gas) in the peak regulation period to produce chemical products is crucial to the success of coal-to-natural gas projects. The by-products can not only improve the economic benefits of a plant, but also help to meet increasingly stringent environmental protection requirements and even improve the plant’s environment.
(2) Producing fine chemicals from natural gas has great potential
The main component of natural gas is methane, which has a very stable molecular structure, so there are few downstream chemical products of natural gas.
After several decades of development, technology for the utilization of natural gas to make chemicals now has two technical routes – the direct method and the indirect method. In the direct method, chemical products are produced through the direct conversion of natural gas, while in the indirect method, natural gas is first transformed into synthesis gas containing hydrogen gas and carbon monoxide, and then is processed to produce chemical products.
As a clean energy, natural gas is a very good chemical raw material. At present, the tight supply of natural gas has restricted its application in chemical industry. However, with the increased supply of natural gas in China, the policy will also change, so the development of natural gas industry chain is worth attention. The domestic fine chemicals industry has a high technical threshold, and some of these products are in short of supply and can be considered as the future development trends of natural gas.