Chinese Coal-to-Liquids and Gas Program Could Completely Change the World Energy
Markets
China will increase LNG imports. Some predict imports of 110 billion cubic
meters per year (BCM) by 2020. However, the cost of LNG is presently $16/MMBtu.
This is an expensive fuel source when China has domestic options including
coal-to-gas, underground coal gasification, and coal bed methane.
China is therefore changing focus and is pursuing these alternatives. The
biggest program includes building plants in the western and northern coal fields
which will convert coal to gas. This gas will be piped across country and
provide clean burning fuel for major eastern cities. It is the avowed
solution to the smog problem.
The reason for a huge coal-to-gas program is the low cost of the product from a
reliable domestic source. Here are the cost components:
Cost of Gas Derived From Coal
Cost Segment |
$/MMBtu |
Coal |
2.00 |
Capital |
1.30 |
Operation and Maintenance |
1.20 |
Total |
4.50 |
The costs for coal bed methane are likely to be in the same range. Underground
gasification could be even less expensive depending on the depth of the seam.
If China produces 200 BCM from coal and coal bed methane and buys only 40 BCM of
LNG, then the implications on the world LNG market will be very substantial.
There would be a negative effect on gas prices. The program would benefit
a gas turbine operator or gas-to-chemicals manufacturer in any country which
would be a potential exporter of LNG. Here are the Chinese gas sources
under a plan to make maximum use of coal gas.
Gas Use In China |
||
Source |
2013 BCM |
2025 BCM |
Conventional |
100 |
100 |
Shale |
20 |
50 |
Pipeline imports |
20 |
50 |
LNG |
20 |
40 |
Coal to gas including CBM and
UBC |
50 |
200 |
Total |
210 |
440 |
The Chinese have 15 coal-to-gas projects underway which will produce 80 BCM of
gas per year. Another 25 projects are under discussion which, if all were
constructed, would raise gas from coal production to 200 BCM. This compares to
the U.S. present shale gas production of 260 BCM.
China has the world’s third largest ready reserves of coal bed methane (CBM),
estimated at 36.8 trillion cubic meters (TCM), of which 10 TCM can be exploited.
China plans to complete construction of two
major coal bed methane production bases in the central and western regions by
2015 and increase the number to three to five in another ten years.
China is also the leader in underground gasification. It has thirty projects
under discussion and one in construction.
Carbon Energy's first commercial UCG project is
located at Haoqin Coal Field in Xiwuqi in Inner Mongolia, China.
Underground coal gasification is estimated to increase reserves by 300 to 400
percent. When coupled with coal bed methane, total recoverable reserves
are sufficient to supply the world for hundreds of years.
Here is the Chinese coal production for last year compared to a very approximate
estimate of coal production in 2025:
Chinese Coal Consumption |
||
Coal Use |
Million Tons 2013 |
Million Tons 2025 |
Large electric power |
2,500 |
3,000 |
Residential |
50 |
0 |
Industry |
300 |
50 |
Heating |
100 |
50 |
Steel and other ( coke) |
400 |
700 |
Coal to gas including CBM and
UGG |
50 |
700 |
Coal-to-chemicals and fuel |
120 |
800 |
Total |
3,520 |
5,300 |
The Chinese vision entails cleaning up the air in the big cities by piping in
coal gas from the west and north of the country. The elimination of 300 million
tons of coal burned by industry and residences will go a long way toward
reducing the smog in Beijing and elsewhere. The Chinese leaders have been
quoted as saying that the health of these citizens in the short term is a higher
priority than global warming.
In China, 16 olefin and polypropylene from coal projects are due for start up by
the end of next year with a combined capacity of 10 million tons per year. This
new capacity will exceed the additional petrochemical capacity planned for the
U.S. So the Chinese are saying that shale gas is only one route to an
inexpensive raw material for chemical manufacture. With another 650
million tons of coal slated for coal-to-chemicals, China will be a major
petrochemical manufacturer.
The conventional coal-to-fuels route uses indirect gasification. For
decades there has been research on direct liquefaction. This is potentially a
much less expensive way to make high quality liquid fuels. China now has a
successful commercial direct liquefaction plant in operation and two more under
construction.
China has coal reserves in excess of 110 billion tons. Another 300 billion tons
could be recoverable with underground coal gasification. Coal bed methane
is a reserve of equivalent size. China imported 276 million tons of coal in
2013. The environmental efforts to reduce coal burning in many countries have
unintended consequences. Reduced world demand for coal lowers prices.
China will be the beneficiary.
World coal production is now 8 billion tons per year. China is the major
consumer, but it is also the major supplier of cement and other energy intensive
products, so its coal consumption is proportional.
China is leading the coal-to-gas and chemicals initiative, but India and other
countries are likely to follow. The lower the per capita GDP, the lower
the relative concern about global warming and the greater the concern about the
necessities of life. To the Chinese apartment owner faced with $16/MMBtu
LNG or $4.50/MMBtu coal gas, the global warming arguments are not likely to be
persuasive.
China can also make a case for the total environmental benefits of the program.
If the result is smogless cities, the benefits will be very substantial.
The tradeoff between CO2 and pollutants such as NOx and
particulate has been reduced to a common metric by McIlvaine in the
Sustainability
Universal Rating System.
McIlvaine continually analyzes these developments in two publications
N049 Oil, Gas, Shale and
Refining Markets and Projects
and
N043 Fossil and Nuclear
Power Generation: World Analysis and Forecast.
The costs and potential for alternatives are analyzed in
N042 Renewable Energy
World Markets.
The company was founded to further environmental knowledge in 1974. In
response to the oil crisis, McIlvaine initiated the Coal Gasification and
Liquefaction Knowledge System in 1979. The first issue covered DOE activities to
develop direct coal liquefaction. This technology was eventually acquired
by a U.S. company Headwaters. It is this technology 35 years later which
is finally being commercially deployed in China.
How different would the situation in the Middle East be today if the U.S. had
continued to support the synfuels programs? One can only speculate. The
future of Middle East supply is equally uncertain. The perspective of China
faced with assured coal gas or uncertain quantities from an unreliable Russia
and a region in revolution has to be weighted toward reliable supply. In other
words, China will make the decision the U.S. could have made decades earlier.
Headlines for June 27, 2014 – Utility E-Alert
UTILITY
E-ALERT
#1181 – June 27, 2014
Because of the Fourth of July Holiday the Next E-Alert will be July 11
Table
of Contents
COAL – US
COAL - WORLD
·
Consortium agrees to develop First Phase of 1200 MW Coal-fired Power Plant in
Vietnam
·
POSCO Energy wins License for CHP-5 in Mongolia
GAS/OIL – US
·
Transco files at FERC for Rock Springs Expansion Project to New Gas-fired Power
Plant in Maryland
·
Natural Gas-fired Power Plant planned for Salem Township, Pennsylvania
GAS/OIL – WORLD
·
Institute for Democracy and Economic Affairs
(Ideas)
urges New Tenders for Project 4A in Johor State, Malaysia
·
Siemens Consortium receives Turnkey Construction Order from PETRONAS for
Cogeneration Power Plant in Johor, Malaysia
·
Huaneng Power International, Inc. Shanxi Dongshan Gas Turbine Project obtains
Approval
·
BHI Co. awarded Contract by Samsung C&T for design and supply of HRSGs for
Rabigh II Combined Cycle Power Plant in Saudi Arabia
NUCLEAR
·
China’s ICBC to finance Romanian Nuclear Project
·
Westinghouse developing Seismic Option for AP1000 Nuclear Reactor
·
Korean Consortium to upgrade Research Reactor in the Netherlands
BUSINESS
·
$9 Billion Fabric Filter System Market will expand from 4 Percent to 8 Percent a
Year
·
Wisconsin Energy buying Integrys for $5.8 Billion
·
General Electric wins $17 Billion Bid to buy Alstom's Gas Turbine Business
·
Dominican Republic, AES Corp. strike US $260 Million Energy Deal
·
AES sells Minority Stake in Masinloc Power Plant and Development Projects in the
Philippines to EGCO Group for $453 Million
·
FirstRand Limited Investment Banking Unit will finance $120 Million of Ghana’s
$820 Million Kpone Power Plant
HOT TOPIC HOUR
·
The Hot Topic for June 26 was “CCR $ Billions Needed”
·
Gas Turbine Emission Control Webinar on July 17 will focux on NOx, CO and Toxics
·
Webinar on July 10 on Direct Sorbent Injection
·
Wet Calcium FGD “Hot Topic Hour” on July 24
·
Upcoming Hot Topic Hours
For more information on the Utility Tracking System, click on: http://home.mcilvainecompany.com/index.php/databases/2-uncategorised/89-42ei
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DATE |
SUBJECT |
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|
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July |
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|
10 |
Direct Sorbent Injection |
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|
17 |
Gas Turbine Emission Control |
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|
24 |
Wet Calcium FGD |
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|
31 |
Mercury Sorbent Options |
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August |
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|
7 |
MATS Timing and Technology
Options |
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|
14 |
Industrial Boiler and Cement
MACT Timing and
Compliance Options |
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21 |
MEGA Symposium |
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28 |
Demineralization and
Degasification |
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September |
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4 |
Hot Gas Filtration |
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11 |
Power Plant Pumps |
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18 |
Power Water Monitoring |
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25 |
Power Plant Water Treatment
Chemicals |
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Bob McIlvaine
President
847-784-0012 ext 112
rmcilvaine@mcilvainecompany.com
www.mcilvainecompany.com