This report provides a review of the Chinese energy security concerns, since imports are providing an ever increasing proportion of the oil and gas used compared to domestic supplies. Due to the relative paucity of Chinese oil and gas reserves, the government has adopted a policy of diversification by securing supplies via overland pipelines and by tankers from various sources. At the same time, due to its abundant coal availability, China has initiated very significant industrial development and demonstration programmes to establish certain coal transformation processes. These cover coal-to-oil, gas and key chemicals, namely olefins, dimethyl ether and ethylene glycol. These programmes are at the stage where some very large industrial-scale projects are being constructed while for coal-to-oil, a major demonstration and three industrial pilot units are already operational. As such, over the next few years, China could establish first user advantage for many such processes. However, it is not at all certain that the originally perceived deployment of commercial-scale technologies will follow. For example, concerns have been raised regarding excessive use of coal and water to produce quantities of product that will not significantly reduce the projected import levels of oil. At the same time, chemicals made from coal may struggle to be competitive with imported materials produced from low cost gas supplies. Consequently, the state government has reined in both the scope and the pace of the originally expected developments. While some technologies may proceed beyond the demonstration stage, the very large investments necessary to establish significant capacity may not represent the best use of Chinese financial capital. Consequently, the future of all these coal transformation projects will depend on how China deals with the increasing challenges of balancing economy, energy and environment, as part of its aim to establish sustainability of its long-term development while, at the same time, addressing shorter term issues such as matching supply and demand.
Title: Coal-to-oil, gas and chemicals in China, CCC/181
Author(s): Dr Andrew Minchener
ISBN: ISBN: 978-92-9029-501-3
Publication Date: 01/02/2011