October 3, 2005. Copyright 2005, Graphic News. All rights reserved

China looks to its coal reserves to fuel transport revolution
By Mark Rutter

LONDON, October 3, Graphic News: China currently imports around one third of the oil it consumes, and this is predicted to rise to half by 2010. With most of global reserves located in politically unstable countries and prices reaching new highs, it is now looking towards its huge coal reserves to meet its increasing energy demands. 

Originally developed in Germany in the 1920s, the 'Fischer-Tropsch' process allows solid fuels such as coal to be converted to liquid fuels which can replace petroleum. Advances in Fischer-Tropsch technology took off in China in 2004 with the construction of their first production-scale coal-to-oil plant in Inner Mongolia. Built by China's largest coal mining group, it will use indirect 'coal liquefaction' technology originally developed by Shell, a modern version of the Fischer-Tropsch process where hydrogen and carbon monoxide gases obtained by heating coal are made to recombine to form petroleum products.

The technology has been used successfully by SASOL in South Africa since the country was forced to exploit its coal reserves when, shunned by the international community for its apartheid policies, it was unable to import sufficient oil for its needs. China has reportedly signed an agreement with SASOL to build two more coal-to-oil plants. Today SASOL produces in the region of 150,000 barrels of oil per day from coal. Each of the Chinese plants would be four times as large; once operational they could produce sufficient synthetic fuel to replace around half of China's current oil imports.

Coal to oil technology has been described as a 'clean' technology in which polluting sulphur and mercury are removed, but it still results in considerable emissions of carbon dioxide, contributing to the greenhouse effect. A recent report from Germany named China as the fastest growing source of energy-related carbon dioxide emissions with levels rising 15% between 2003 and 2004, compared with the global average of 4.5%.

Although there is increasing interest in carbon sequestration - where industry-generated carbon dioxide is captured and buried underground - environmental groups claim that the procedure is untested and that there are risks of the gas escaping over the long term. A new report from Greenpeace - 'the Energy Revolution' - claims that the European Union could make an 80% reduction in its carbon dioxide emissions by 2050 through making greater use of renewable resources such as wind or solar power, without resorting to technological fixes such as clean coal.

China has just joined a pact with the world's other large coal producers - the United States, India, South Korea and Australia - to promote the development of less carbon intensive energy. Touted as an alternative to the Kyoto Protocol, it is designed to encourage investment in clean technologies, and with coal-to-oil likely to play an increasingly prominent role, interest and investment in the technology is set to continue for the foreseeable future.

/ENDS