China looks to the future

China published its 12th Five Year Plan in March this year. Although the very notion of a Five Year Plan was copied from the old Soviet Union, and the concept remains a relic of central planning, this year the Chinese government is insisting that it be called a ‘guideline’ rather than a ‘plan’, in order "to reflect the transition from a centrally planned economy to a socialist market economy". Those who might be tempted to scoff at this as a purely cosmetic touch should at least consider just how far and how fast China has changed over the past decade, and how fast it is still changing. And the new plan shows that the Chinese government is fully aware of China’s problems with pollution and environmental concerns, sustainable growth and inequalities of wealth, and is attempting to take steps to tackle them. This is the first Five Year Plan to mention climate change, for example, and it sets a target for a 17% improvement in energy efficiency.

China is often excoriated as an example of unfettered economic growth and a ‘slash and burn’ attitude to the environment, but in fact the country is – at least in recent years – often more forward-thinking than its critics give it credit for. On a recent visit to China, I was struck by the sheer number of wind turbines that seem to have proliferated across the northern hills, to take just one example. China has revised its target for wind energy to generate 70GW by 2015, higher than the previous target for 2020.

However, China’s main feedstock remains inescapably coal, with 94% of China’s energy currently coming from coal. In attempting to convert this to other uses, possibly involving carbon capture and storage, syngas-based industries will continue to play a key part in China’s economy. Coal to olefins production will need to cover a forecast gap of 6 million t/a of olefins demand by 2015, and the current plans indicate that 5 million t/a of this could come from coal-based methanol to olefins (MTO) plants. The Five Year Plan targets 20% of olefin production to come from ‘diversified’ sources, which for China essentially means coal, and the successful start-up of the Shenhua Baotou plant in August last year has helped to alleviate some concerns regarding MTO as a process route.
Coal to liquids (CTL) production is also estimated to rise to 12 million t/a over the period of the 12th Five Year Plan, and the four huge synthetic natural gas (SNG) projects currently under development are scheduled to be producing 15 bcm per year by 2015, and the approval of a fifth project could take that to 20 bcm.

Ammonia and especially methanol production are also set to increase – methanol demand being bolstered by new national fuel standards on methanol and dimethyl ether (DME) which are due to be published this July. The previously fragmented nature of some of these industries, with small plants, difficulties in accessing coal and access to commercially viable technologies have emerged as the main roadblocks in coal-to-chemicals projects, and so China's National Development and Reform Commission (NDRC) has now set minimum project sizes required to gain approval; the minimum capacity for a new coal-to-olefins plant has been set at 500,000 t/a in terms of olefins, while a 1.0 million t/a limit has been set for coal-to-methanol projects, in order to gain suitable efficiencies of scale. This will be assisted by moves on the feedstock front; another key part of the 12th Five Year Plan is the streamlining of the Chinese coal industry, with the current 11,000 enterprises to be reduced to 4,000, mostly in the hands of 6-8 major coal groups. The bulk of the announced coal-to-olefins projects are from companies that have coal arms or utilities businesses with coal supply, thus ensuring feedstock supplies for the projects.

China has already come to dominate the methanol industry, and is the largest ammonia producer and consumer in the world. It looks as though it will also be setting the pace in the development of CTL, MTO, DME and many other syngas-based industries as well.