Coal conversion has become profitable in China because of an unusual combination of low coal and higher gas and petrol prices.
An existing coal conversion plant in Ningdong © Getty
Water-guzzling coal-conversion projects are springing to life in arid western China, setting the stage for the large-scale deployment of what was previously a niche industry.
A three-year downturn in coal prices has revived projects that convert coal to motor fuel, petrochemical feedstock or gas, after many were shelved in 2008 because of concerns about water supply and pollution. Successful development in China opens the door to the export of coal-intensive technologies, undercutting international efforts to limit emissions of carbon and other greenhouse gases. Coal conversion is not only highly polluting, it also consumes large amounts of water. …
China’s coal giants want to promote coal conversion overseas, especially as part of China’s “Belt and Road” initiative.
“We are pushing overseas projects where there are low-cost coal resources,” Mr Zhang said. Projects that work in China’s state-dominated economy may not be practical elsewhere.
Coal conversion has become profitable in China because of an unusual combination of low coal prices relative to state-set gas or petrol prices. Coal-to-liquids projects normally make economic sense only when oil prices are high or supply is limited. The technology was first developed in Nazi Germany, and commercialised in apartheid-era South Africa.
Natural gas prices are set relatively high in China to justify pipelines running thousands of miles from central Asia to population centres in the east. That gives an opening to gas derived from coal, which is projected to supply 12 per cent of China’s gas consumption by 2020. The switch to gas forms part of Beijing’s Paris agreement pledge for emissions to peak around 2030.