secret to cheap oil is dewatered coal, page-2

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Liquefied Coal Cuts Oil Need
China plans to launch a coal liquefaction programme in the next five years to ease the nation's oil shortage.

The State Development Planning Commission is carrying out a feasibility study on setting up coal liquefaction projects in Yunnan, Shaanxi and Heilongjiang provinces, according to a senior official with the commission.

"Experiments have been finished in these three places. The results were desirable, but we have not located the specific site to launch the project," said the official.

Analysts predict that total investment for the project will amount to billions of US dollars with the annual output of 2 or 3 million tons of oil.

Coal liquefaction is the chemical process of adding hydrogen to coal under high temperature and pressure to liquefy coal into crude oil.

"Generally speaking, 2 tons of coal can turn out 1 ton of oil," explained Shu Geping, a senior engineer of the China Coal Research Institute.

Given the fact that the total reserves of coal in China far exceed those of oil, it is desirable to implement the technology to stretch the oil supply, Shu said.

According to Shu, 20 billion tons of the total proven coal reserves can be liquefied into 10 billion tons of oil, sufficient for China's consumption for 50 years.

Thanks to 20 years of hard work and co-operation with developed countries, China has mastered the technology and can perform the commercial operation at a desirable cost, said Shu.

With the coal liquefaction technology, producing 1 ton of oil is 30 per cent cheaper than purchasing oil from the overseas market, Shu added.

"A coal liquefaction manufacturer can recoup their total investment within 13 years," Shu noted.

The systematic research of the coal liquefaction technology dates back to 1910. Since then many countries such as Germany, the United States and Japan have been making great efforts to develop the technology. However, due to the high cost of coal and labour in developed countries, this technology has not been commercialized on a large scale.

But South Africa, whose structure of energy reserves is similar to China's, has established three coal liquefaction manufacturers with total investment of US$7 billion in 1950. In 1999, these manufacturers registered a profit before tax of US$610 million.

"If the government can make some preferential policies, such as cutting down the oil consumption tax and value added tax, coal liquefaction manufacturers can attain more profits than factories in South Africa," Shu said.

China has been a net importer of oil since 1993. It is expected to import 70 million tons of oil this year. (Source: chinadaily.com.cn)