LEADING coal producer Inner Mongolia Yitai Coal Co Ltd has gained approval for a 29.1 billion yuan (US$4.2 billion) coal-to-liquids (CTL) project in Inner Mongolia Autonomous Region. Once completed, the project is expected to produce 2.15 million tonnes of diesel, naphtha, liquefied petroleum gas and liquefied natural gas, as well as 157,700 tonnes of other chemical products.

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One of the Yitai Group’s modern new coal mines in Inner Mongolia Autonomous Region of northern China.

The company’s subsidiary, Inner Mongolia Yitai CTO Co Ltd, will invest 8.72 billion yuan in the project with the remainder coming from bank loans.

China is the world’s biggest energy consumer and has made largely untested coal-to-gas technology a key part of its strategy to boost use of cleaner fuels as it battles pollution in its major cities.

CTL technology uses coal to generate carbon monoxide and hydrogen through gasification. The gas is turned into synthetic fuel and chemical products by heating and adding catalysts.

Coal-to-gas (CTG) and coal-to-liquids projects are seen as solutions for fuel shortages and environmental pollution.

In 2006, Yitai invested 2.7 billion yuan in its pilot CTL project, which has generated 160,000 tonnes of oil products a year since it was completed in 2009. Yitai has since launched four CTL projects and aims to produce 20 million tonnes a year.

China’s CTL market is led by four coal giants - Shenhua Group, Inner Mongolia Yitai, Lu’An Group and Yankuang Group. Shenhua’s Ningxia Coal Industry is developing the largest single CTL installation with targeted output of 4 million tonnes.

CTL projects break even when the coal price is about 400 yuan per tonne with oil at $50-$60 a barrel, according to data from Synfuels China, a research company launched by the Yitai Group.

Yitai Group has 12 large and medium-sized coal mines that have been put into production with one large mine under construction. Total annual production capacity exceeds 50 million tonnes.

In 2005, the company initiated a technical transformation in response to requirements imposed on local mines by Ordos municipal government to ‘improve the production technology and the recovery ratio of coal resources’. In three years, the company invested more than 3 billion Yuan and integrated 33 mines into 12 comprehensive, modern coal mines.

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