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China has reportedly seen a revival of
Coal-to-liquids (CTL) projects,
which were suspended many years ago
by the Chinese Communist Party (CCP) regime.
Industry insiders estimate the projects awaiting
approval may involve RMB 700 Billion.
Excessive development of China's coal chemical industry
has long been controversial for its pollution and water waste.
Commentators say it is another shortsighted action taken
by local authorities for fiscal revenue and pull GDP figure.
On September 2008, the CCP's National Development
and Reform Commission (NDRC) issued a notice.
The notice strengthened regulation of CTL projects.
The regime ordered all CTL projects to stop
in China, except the two under Shenhua Group.
The notice has now been removed from the webpage,
but lots of related news reports are still accessible online.
In May 2009, the General Office of the CCP's State Council
released a plan to restructure the petrochemical industry.
The plan stated, "prohibit the approval or filing" of
market access for coal-to-chemical technology and projects.
Recently, China Business Journal reported news about
the coal liquefaction project of Inner Mongolia Yitai Group.
Yitai's 2-million-ton CTL project is reportedly waiting NDRC
approval, and is expected to get the green light soon.
The news said there are coal-to-chemical projects awaiting
approval that involve investment of RMB 700 Billion.
These neo-type projects are located
in Inner Mongolia, Xinjiang and other regions.
Sichuan-based senior engineer Fan Xiao says that
environmental capacity is a must factor to be considered.
Fan Xiao comments that the CCP regime approving such
large projects is not based on the actual demand.
Short-term interests that can benefit local authorities are
the main reason behind the approval, said Fan Xiao.
These benefits include tax, GDP,
local fiscal revenues, etc.
Fan Xiao: "A lot of existing basic resource projects, like coal
and power, has been brought into question in large scale.
In the next decade or so, China's investment
in energy has far exceeded its needs, in reality."
Traditional coal-to-chemical projects are known
as high energy consumption, heavy pollution, small scale and obsolete technologies.
Back in the period of 2006-2010, China had
excess capacity in the coal-to-chemical industry.
The late-model coal-to-chemical
projects have high use of water.
This caused a more serious water crisis in Western China,
where there are abundant coal deposits but lack of water.
Xie Tian, Professor, University of South Carolina:
"This project shows a lot of problems.
Firstly, it's greatly subsidized by the government, and
has such high water usage and immature technology.
If it is invested in heavily, it's very likely to be a huge waste.
So it cannot really be commercialized, and would probably
never cover its cost. That would be a huge financial hole.
In my view, China's economic downturn and stagnation
has put too much pressure on the regime.
Now it's not choosy about its food. Once the project
looks favorable, it will rush hastily to launch it."
A research fellow at a Shanghai-based investment
consulting firm revealed data to the China Business Journal.
On average, the production of 1 ton
of CTL uses about 9 tons of water.
1 ton of coal to olefins needs about 20 tons of water.
1 ton of the coal-based dimethyl
ether uses some 12 tons of water.
High water usage is coal-to-chemical
industry's biggest problem.
Fan Xiao: "There is no infinite supply of water resources.
That's bound to cause a water supply crisis.
In return, it pollutes water resources
and the atmospheric environment.
It also poses potential risks for the economy,
as energy can be easily affected by market fluctuation.
For example, the price of coal
has slumped in the last one year.
So in the long run, heavy financial cost
will be hidden inside these projects."
A number of coal-to-chemical projects have
pegged the Yellow River as their water source.
A joint research report was released on August 14
by Greenpeace International and the Institute
of Geographic Sciences and Natural Resources
Research, Chinese Academy of Sciences.
It states that in China's official "12th Five-Year Plan",
16 large coal power stations are to be constructed.
They will be located in Western China, with the daily
use of water at nine times the supply capacity in Beijing.
The projects awaiting official approval
have aroused public concerns in China.
Environmental activist Chen Yunfei remarked
that these projects form "another portfolio".
It is "another portfolio" without seeking
public opinion, nor real expert assessment.
It is "another portfolio" that is divided up among local
authorities and interest groups, said Chen Yunfei.
In reality, since the CCP took rule of China,
the country has existed in the pollution caused by so many of these kinds of project.