A general description of CTL Tech in China. Done in Dec 2009. For more info about Noether, please check www.noetherassociates.com

1. Coal-to-liquid Technology

2. Benefits of CTL
China, whose coal reserves are estimated at 1 trillion tons, has become more dependent on importing oil. Coal-oil is a
possible solution for the increasing demand on oil, and would keep the dependence on importing oil around 50%.
Benefits of CTL
Coal liquids can be used for transportation, cooking, generating power, and the chemical industry.
Coal-derived fuels are sulphur-free, low in particulates, low in nitrogen oxides, making it a cleaner option.
Liquid fuels from coal provide clean cooking fuels, alleviating health risks from indoor air pollution caused by cooking.
Supply & Consumption of Coals, 1980-20051 Oil Supply in China, 2005-20302
Million Ton Million Ton %
2,500 900 100
800
2,000 700 75
600
50
1,500 500
400
25
1,000 300
200 0
500 100
0 -25
2005 2010 2015 2020 2025 2030
0
Import Local Produce
1980 1984 1988 1992 1996 2000 2004
Coal-oil Oil Importing Dependence3
Consume Supply
Source: 1. China Coal Research Institute; 2. Cleaner Coal in China, International Energy Agency (IEA); 3. Predicted by IEA
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3. What is CTL?
Converting coal to a liquid fuel (coal-to-liquid/CTL) – a process referred to as coal liquefaction – this allows coal to be
an alternative to oil as a fuel source. CTL is not clean energy, but it is suitable for countries that rely heavily on oil
imports, and have a large domestic reserve of coal, so it might be a energy resource in the future.
Types of CTL
Indirect liquefaction gasifies the coal to form
Direct liquefaction works by dissolving the
a ‘syngas’ (a mixture of hydrogen and carbon
coal in a solvent at high temperature and
Direct Indirect monoxide). The syngas is then condensed
pressure. This process is highly efficient, but
Liquefaction Liquefaction over a catalyst – the ‘Fischer-Tropsch’
the liquid products require further refining to
process – to produce high quality, ultra-clean
achieve high grade fuel characteristics.
products.
Development of CTL Tech
1850s: Coal liquefaction was used to produce kerosene.
1920s: Two German chemists, Franz Fischer and Hans Tropsch, developed a process to convert coal into a gas and
then used it to make synthetic fuels.
1955: Sasol - the only commercial coal-to-liquid plant in the world - perfected this technology at its first plant in
Sasolburg, South Africa.
1950s: China started research on Coal Liquefaction.
1980: CTL research in China restarted
2008: 4 on going projects in China.
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4. Impact and Possible Solution
Over its life cycle, CTL emits almost double the CO2 as compared to conventional liquid fuels derived from crude oil1.
CTL technology also emits large amounts of sulphur dioxide. However, CTL technology proponents have indicated that
the technology can be improved.
Typical CTL CO2 Emissions2
Gas Circuit
0-12% Possible reduction solutions for utility CO2:
• Improved process efficiencies
Rectisol Furnaces • Alternative energy for utility generation
45-60% 3-6% – Nuclear
– Hydroelectricity
– Solar
Process CO2
Possible reduction solutions for
process CO2: Utility CO2
• H2 production via water splitting Utility boilers
• Carbon Capture and Storage (CCS) 22-52%
Case of CO2 Emission Reduction
Sasol’s newer plants capture carbon underground, as sequestration (separation) technology traps and buries the CO2
waste emissions. With sequestration, powering a car with liquid coal is approximately 30% cleaner than using petrol.
Source: 1. Risks of oil transition, Farrell A.E and Brandt A.R., Environmental Research Letters; 2. Sasol Technology
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5. Economic Sense
CTL technology makes economic sense only in a market of high oil prices. Coal-oil will be profitable, as long as the
international oil price is higher than USD 50/barrel. As oil price increases, worldwide liquid-coal production is
expected to rise from 150,000 barrels (2007) to 600,000 in 2020, and 1.8 million barrels a day in 2030.
Trends of Coal & Oil Price, 2000-20091
$/ton $/barrel
900
Since 2006, the price of oil in
800 China has been consistent with
the international oil price. The oil
700
price has become increasingly
600 unstable in the past two years.
Since 2005, the price of coal in
500 China has been influenced by
the International Coal Market.
400 Recently, the coal price has
become more stable.
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2 3
BJ China Coal Spot Price MCIS Asia WTI
Source: 1. Cleaner Coal in China, International Energy Agency; finance.ifeng.com
Note: 2. MCIS: McCloskey Coal Information Services; 3. WTI: West Texas Intermediate, normally considered to be a benchmark of international oil price
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6. CTL Projects in China
China had numerous CTL projects a few years ago; however, the amount has decreased within the past 3 years.
Concerning its environmental impact, no more CTL projects will be approved in China in the next 3 years. The
increasing price of coal and unstable price of oil has caused investors to be wary of the return on investment.
Projects in & out of China
The world’s only commercial user of CTL technology is Sasol, which is
based in South African, established in 1955.
There are 4 main Coal Groups with ongoing coal-oil projects in China:
Shenhua, Lu’an, Yankuang and Yitai.
The National Development and Reform Commission only approved
Shenhua’s 2 Coal Liquefaction projects in 2008 due to the environmental
impact, particularly water.
Shenhua Direct Liquefaction Project
Project Cost in China
It is forecasted that the cost of coal-oil will decrease as the technology matures in the future1, making it a more profitable industry.
Predicted Cost of a CTL Project ($/ton)2
Direct Liquidation Indirect Liquidation
Current Cost Future Cost (2030E) Current Cost Future Cost (2030E)
Technology Investment 1171-1464 878-1171 1318-1610 1025-1318
Operation Cost 249-351 264-381 278-381 293-410
Total Cost 1420-1816 1142-1552 1596-1991 1318-1728
Source: 1. China Coal Research Institute; 2. $1=6.83 RMB
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7. Appendix: CTG Technology
Coal-to-gas (CTG) is another technology to convert coal to another resource. Compared to coal-oil, coal-gas has a
higher efficiency regarding energy transformation and lower cost of water, thus it has less impact to the environment.
China’s need for nature gas is increasing and coal-gas will be a plausible replacement of it.
Comparison Between Coal-oil & Coal-gas Technology1 Gas Supply and Demand in China, 1970-20062
% ton/GJ Million m3
100.0 0.5 60
0.4 50
50-52% 40
0.3
50.0 34.8% 30
0.2
20
0.38 0.18-0.23 0.1
ton/GJ ton/GJ 10
0.0 0 0
Coal-oil Coal-gas
Cost of Water Energy Efficiency -10
1970 1975 1980 1985 1990 1995 2000 2005
Local Produce Import
Export Local Consume
Projects in & out of China
There are around 10 coal-gas projects under plan in China, with only one approved.
The only enterprise that produce coal-gas in the world is Dakota Gasification Company (Great Plains Synfuels Plant) in the US,
which has proven not to be quite profitable.
Source: 1. finance.ifeng.com; 2. Cleaner Coal in China, International Energy Agency
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