Suspicion at plans to extract oil from coal

PUBLISHED : Tuesday, 26 July, 2005, 12:00am
UPDATED : Tuesday, 26 July, 2005, 12:00am

High oil prices have driven more than 10 northern and western provinces to propose coal liquefaction projects valued at 120 billion yuan.

But coal industry experts warn that local governments and businesses are attempting to use coal liquefaction to justify opening new mines, something prohibited by the central government since 2002.

The director of the China Coal Research Institute, Du Minghua, told the Economic Information Daily that 'sensationalism' over high oil prices and a looming oil crisis was even stronger than the already robust demand for coal in some regions.

'In order to expand their coal resources, some businesses are using coal liquefaction as an excuse to open new mines as soon as possible,' Professor Du said.

A coal quality analyst at the institute said coal liquefaction was an immature and hugely expensive technology, with each factory costing billions of yuan.

'The technology has been exaggerated,' he said. 'Everyone lost their heads and it's become a type of political mission.'

The quality of coal in some provinces was below that needed for coal liquefaction and many proposals had ignored factors such as the local industrial infrastructure, the availability of technical staff, market demand and the ability of consumers to pay.

Coal liquefaction is a technology that takes coal and breaks it down to form a fuel oil.

Zhou Dadi , director-general of the energy research institute at the National Development and Reform Commission, has said that liquefaction is not suitable for a developing country.

He said it was an inappropriate substitute for oil because coal was also an exhaustible resource.

Even the United States had stopped using coal liquefaction to replace oil because of its cost and only South Africa had developed mature liquefaction technology.

Last June, China agreed to pay South Africa National Energy Technology Laboratory US$1 billion as a technology transfer fee.

The central government has named Heilongjiang , Yunnan and Inner Mongolia as three experimental sites for clean coal industries.

Only Heilongjiang has begun the liquefaction process, with the other two still trying to raise enough money.