China yet to approve SASOL coal-oil scheme

[] — China’s Ningxia region hopes building work will start this year on a major coal-to-oil project designed by South Africa’s SASOL but central government has yet to give the go-ahead, the region’s governor said.

“We hope that the project will begin construction at the end of this year,” Wang Zhengwei told reporters on Monday on the sidelines of a conference in Beijing.

“For the actual schedule you need to wait until expert research has been completed — the experts will decide what the best technology is, what the best plan will be — when that is settled we will decide the construction plan for this project.”

In April a study of the joint coal-to-liquids project between China’s top coal producer Shenhua Group showed that it was planned to produce 93,000 barrels per day.

China began pushing for the widespread development of coal-to-liquids (CTL) technologies in 2006 to cut dependence on foreign oil and make better use of coal reserves in remote regions like Ningxia and its neighbour, Inner Mongolia.

However the National Development and Reform Commission in 2008 stopped approving new projects and cast doubt on the environmental and economic feasibility of CTL technology.

It suspended dozens of projects, leaving only the SASOL project in the northwestern region of Ningxia and a facility being built by Shenhua Group in Inner Mongolia. SASOL is the world’s biggest producer of motor fuel from coal.

The NDRC’s biggest concern was that CTL did nothing to help China reduce its carbon emissions.

To address the problem, Shenhua is building a carbon capture facility alongside its CTL plant, but company officials have conceded the entire project is unfeasibly expensive.

Another key environmental issue in China’s arid northwest, is the huge quantities of water required to turn coal into oil. But Wang insisted the SASOL project had solved the problem.

“The state isn’t allowing any new coal-to-oil projects but they have kept this one in Ningxia,” he said.

“These projects do need a lot of water, but we have adopted measures to use water used in agriculture and transfer it to industry. In Ningxia, 93 percent of our water is used in agriculture. The method has been approved by the Ministry of Water Resources and is being promoted through the rest of the country.”

Wang said the SASOL project would benefit his region.

“If this project is formally completed, the investment of 58 billion yuan ($8.50 billion) will stimulate the economy. Once it is constructed, it will earn 30 billion yuan a year, and 10 billion yuan in taxes,” he said.


Although Ningxia remains one of China’s poorest regions, central government policy means that economic growth can no longer be regarded as the biggest priority, Wang admitted.

“Although we are a relatively backward and remote region, and although the proportion of high energy consuming industries in our economy is relatively high, we are willing to implement these energy saving, emission reduction policies,” he said.

“In the short term, these policies are probably not good for our economic growth, and will cut our GDP, but in the long term, they have the potential of sustainable development.”

Xie Zhenhua, the vice-director of the NDRC and China’s senior climate change official, identified Ningxia as one of the 13 provinces that had failed to meet emission reduction targets for 2006-2010.

Wang said Ningxia had already got tough on inefficient and high polluting industries.

“Xie Zhenhua probably doesn’t specifically understand our situation — in 2009 we were the fifth most successful province in reducing emissions…we are going to meet our targets,” he said.