China’s largest coal miner reported the construction of a major project this week. The project aims to supply feedstock for petrochemical makers and help reduce the fossil fuel surplus.
According to Bloomberg News, China Energy Investment Corp. said it will spend 170 billion yuan ($24 billion) to build an integrated plant in the northwestern region of Xinjiang that will convert coal into oil products. The first phase of the project is scheduled to begin operations in 2027.
The facility in the city of Hami is the latest in a series of coal-to-oil developments that have been licensed in recent years at mining centers in Xinjiang, Shaanxi, Ningxia, and Inner Mongolia. Hami itself has indicated it will approve 300 billion yuan worth of such projects in its five-year plan to 2025, which could consume 152 million tons of coal by the end of the decade.
For rapid clean energy deployment, China remains the world’s largest coal producer and continues to push its production to record levels reaching 4.7 billion tons last year. The primary use of this fuel in generating electricity has reached a turning point, having been surpassed for the first time by solar and wind installations.
President Xi Jinping also said that consumption will have to start falling from 2026 to meet China’s climate targets, leaving coal miners to find other avenues for their products.
The decline of China’s petrochemical industry is due to rapid expansion and a weak economy, which has caused consumption to slow. Profits from the process of turning coal into oil fell 53% last year.
In addition, profit margins that depend on the difference between coal and oil prices narrowed as China suppressed coal prices and oil imports slowed. Beijing’s decarbonization efforts and declining consumption of products such as diesel and gasoline also weighed on the oil refining industry.
The Hami facility is expected to be successful due to CEIC’s ability to mine coal at low cost and its advanced liquefaction technology.
However, the launch of the facility remains risky as China’s coal-to-oil production capacity has increased 24% since 2019, reaching 11 million tons by 2023. The plant will contribute significantly to national production, despite weak consumer demand and pressure to reduce carbon emissions, not increase them.
Source: https://www.mining.com/web/chinas-top-miner-to-spend-24-billion-on-coal-to-oil-project/
