In contrast, large-scale efforts to produce liquid transportation fuels using coal gasification are well under way. China’s largest coal firm, Shenhua Group, plans to start up the country’s first coal-to-fuels plant in 2007 or early 2008, in the world’s most ambitious application of coal liquefaction since World War II. Shenhua plans to operate eight liquefaction plants by 2020, producing, in total, more than 30 million tons of synthetic oil annually–enough to displace more than 10 percent of China’s projected oil imports.
China’s progress in constructing coal-conversion plants puts it far ahead of the United States, where coal gasification is still recovering from a damaged reputation. Gasification demonstration programs initiated in the U.S. after the energy crises of the 1970s were orphaned when oil and gas prices plummeted in the 1980s. That left many with the impression that the technology itself was unreliable (see “Carbon Dioxide for Sale,” July 2005). In China, by contrast, oil never looked cheap, and coal has never lost its shine.
Coal and Cashmere
Northern China is fast becoming the epicenter of China’s energy industry. The leading draw is the Shenfu Dongsheng coalfield, a 31,000-square-kilometer solid layer of shallow coal that stretches from the northern tip of China’s Shaanxi Province to the southern edge of Nei Mongol, or Inner Mongolia. The Dongsheng field’s estimated reserve of 223.6 billion tons of coal makes it the world’s seventh largest; efforts to convert much of that coal to transportation fuels could make it the world’s most profitable.
Until recently, Inner Mongolia’s coal capital, Erdos, was largely untouched by the modern world, bounded by mountain ranges and the Great Wall to the south and by the Yellow River to the north. Its isolation is now over, thanks to freshly poured highways and new rail lines rolling over its fissured hills and steep valleys. An airport should open this year.
Erdos’s GDP doubled between 2001 and 2004, largely because of coal, chemicals, and cashmere (Erdos supplies a quarter of the world’s cashmere). To reach the coalfields, you drive 40 minutes south of the city, passing a 1950s-era mausoleum for Genghis Khan, the 13th-century warrior who conquered much of Asia. As you approach the dry floodplain of the Wulanmulun River, the imposing infrastructure of a dozen coal mines, including some of the world’s largest and most mechanized, leaps out of the barren landscape. The region is also home to several hundred smaller, less modern mines (gases and cave-ins kill at least 6,000 Chinese coal miners a year). Miners on their day off zip by on mopeds, three or four to a vehicle, racing past 40-ton trucks heaped with coal. Along the highway, coal-sorting terminals load railcars destined for power plants and ports on the industrialized east coast.
None of that infrastructure and activity, however, prepares a visitor for Shenhua’s coal-to-fuels complex, which rises from a plateau cut into the hills. It is an impressive site, with its own coal-fired power plant, gasification plants, and two massive reactors where coal will be liquefied, each weighing 2,250 metric tons (Shenhua claimed the world hoisting record when it lifted the reactors into place last June). Flush from a $2.95 billion IPO in 2005 and $5 billion in annual revenues from its integrated mines, railroads, and power plants, Shenhua is rapidly expanding its operations. It sold 113 million metric tons of coal in just the first half of 2006, nearly matching the previous year’s total. If Shenhua maintains that pace this year, it may become the world’s largest producer of coal.