Factbox: Coal-to-gas, China's novel way of boosting gas supply
(Reuters) - China, the world's top energy user, wants to turn coal in remote areas into gas and then pipe it to cities, where residential and industrial use for the fuel is growing rapidly.
From coal miners to power producers, from private firms to state energy giants, companies are in a push to convert China's abundant and cheap coal into gas, using a mix of locally developed and imported technology similar to that used to produce synthetic fuel in apartheid-era South Africa.
Beijing has approved four pilot projects able to supply 15 billion cubic meters of natural gas a year by 2015.
The following are some facts based on interviews with CTG players and a report by consultancy Wood Mackenzie.
GAS SUPPLY, COAL USE
The four pilot projects, in northwest Xinjiang northern Inner Mongolia and northeast Liaoning, will pump a total of 15 bcm of gas by 2015, nearly 7 percent of China's gas demand then.
To produce each bcm of gas, 2 to 2.4 million tonnes of coal is burned, meaning some 36 million tonnes of coal would be consumed to make 15 bcm gas a year. That would be less than one percent of China's coal production in 2015.
Consultancy Wood Mackenzie forecasts China's total CTG output at 27 bcm by 2015, taking into account projects proposed but yet to win official nod.
EARLY INVESTORS
Datang Energy Chemical Company Ltd, a subsidiary of state-run power firm Datang Group, is building the country's first CTG plants. In July it started a pilot facility in Inner Mongolia with annual capacity of 1.33 bcm by end 2012, and full designed capacity of 4 bcm by 2014.
The other two pilot plants are being built by two private firms, both of them coal miners - China Kingko Group and China Huineng Group.
Kingko plans a 5.5 bcm/year plant in northwest Xinjiang. Huineng is building a 2 bcm/year facility affiliated with a 1 bcm/year gas liquefaction plant.
THE PROCESS
Toasted under high pressure and temperature in 70-80-metre tall gasification towers, the coal turns to a mix of CO2, sulphur and methane. It then goes through a purification and methanation process. The coal-to-gas conversion rate is roughly 30 percent.
The technology is similar to that used in South Africa to produce oil from coal.
The gasification and purification parts of the technology are mostly developed domestically, while the final part of methanation - carbon oxides react with hydrogen to form methane - is supplied by foreign developers such as the U.K.'s Davy Process Technology, Denmark's Topsoe and Germany's Lurgi Group.
GreatPoint Energy, a Massachusetts-based alternative energy start-up, has developed a coal-to-gas process called bluegas technology, which uses a patented catalyst that reacts coal and steam to produce gas in a one-step process. Gas is then separated from other pollutants.
The firm announced in May a $1.25 billion deal to build a CTG plant in Xinjiang, via a joint venture with privately-run China Wanxiang Holdings, an industrial conglomerate.
THE ECONOMICS
For each bcm of gas, the building cost is 4-6 billion yuan ($630-950 million). The first four plants will cost up to 90 billion yuan, or $14 billion.
Experts estimate that a feed-in price at 1.50 yuan/cubic meter, or about $6.4 per million British thermal units (mmbtu) would be break-even level for CTG projects in Xinjiang.
Woodmac estimates breakeven levels for plants in Inner Mongolia at under $8/mmbtu and nearly $10 in Liaoning.
That compares with $10-12/mmbtu for imported liquefied natural gas (LNG) and close to $12 for central Asia gas.
The economics are also dependent on access to pipeline grids. More than 70 percent of China's combined total of 50,000-kilometres of gas pipelines are owned by PetroChina <0857 .hk=".hk">.
From coal miners to power producers, from private firms to state energy giants, companies are in a push to convert China's abundant and cheap coal into gas, using a mix of locally developed and imported technology similar to that used to produce synthetic fuel in apartheid-era South Africa.
Beijing has approved four pilot projects able to supply 15 billion cubic meters of natural gas a year by 2015.
The following are some facts based on interviews with CTG players and a report by consultancy Wood Mackenzie.
GAS SUPPLY, COAL USE
The four pilot projects, in northwest Xinjiang northern Inner Mongolia and northeast Liaoning, will pump a total of 15 bcm of gas by 2015, nearly 7 percent of China's gas demand then.
To produce each bcm of gas, 2 to 2.4 million tonnes of coal is burned, meaning some 36 million tonnes of coal would be consumed to make 15 bcm gas a year. That would be less than one percent of China's coal production in 2015.
Consultancy Wood Mackenzie forecasts China's total CTG output at 27 bcm by 2015, taking into account projects proposed but yet to win official nod.
EARLY INVESTORS
Datang Energy Chemical Company Ltd, a subsidiary of state-run power firm Datang Group, is building the country's first CTG plants. In July it started a pilot facility in Inner Mongolia with annual capacity of 1.33 bcm by end 2012, and full designed capacity of 4 bcm by 2014.
The other two pilot plants are being built by two private firms, both of them coal miners - China Kingko Group and China Huineng Group.
Kingko plans a 5.5 bcm/year plant in northwest Xinjiang. Huineng is building a 2 bcm/year facility affiliated with a 1 bcm/year gas liquefaction plant.
THE PROCESS
Toasted under high pressure and temperature in 70-80-metre tall gasification towers, the coal turns to a mix of CO2, sulphur and methane. It then goes through a purification and methanation process. The coal-to-gas conversion rate is roughly 30 percent.
The technology is similar to that used in South Africa to produce oil from coal.
The gasification and purification parts of the technology are mostly developed domestically, while the final part of methanation - carbon oxides react with hydrogen to form methane - is supplied by foreign developers such as the U.K.'s Davy Process Technology, Denmark's Topsoe and Germany's Lurgi Group.
GreatPoint Energy, a Massachusetts-based alternative energy start-up, has developed a coal-to-gas process called bluegas technology, which uses a patented catalyst that reacts coal and steam to produce gas in a one-step process. Gas is then separated from other pollutants.
The firm announced in May a $1.25 billion deal to build a CTG plant in Xinjiang, via a joint venture with privately-run China Wanxiang Holdings, an industrial conglomerate.
THE ECONOMICS
For each bcm of gas, the building cost is 4-6 billion yuan ($630-950 million). The first four plants will cost up to 90 billion yuan, or $14 billion.
Experts estimate that a feed-in price at 1.50 yuan/cubic meter, or about $6.4 per million British thermal units (mmbtu) would be break-even level for CTG projects in Xinjiang.
Woodmac estimates breakeven levels for plants in Inner Mongolia at under $8/mmbtu and nearly $10 in Liaoning.
That compares with $10-12/mmbtu for imported liquefied natural gas (LNG) and close to $12 for central Asia gas.
The economics are also dependent on access to pipeline grids. More than 70 percent of China's combined total of 50,000-kilometres of gas pipelines are owned by PetroChina <0857 .hk=".hk">.
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