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Coal-to-chemical projects are risky, Deloitte warns
By Richard Fu |
November 30, 2012, Friday
|
Online Edition
Online Edition
WHILE China's feedstock diversification strategy supports the development of the coal-to-olefin business, market entrants should consider risks such as overcapacity and carbon tax, according to a latest Deloitte report.
Using coal to produce olefins is currently explored to complement the traditional oil route in the face of high oil prices. China is the world's largest coal producer but relies on imports for more than half of its petroleum needs.
Olefins, such as ethylene and propylene, are used in the production of petrochemicals and polymers.
In its report, Deloitte forecast China's olefin capacity to reach 56 million tons at minimum by the end of 2015, including 51 million tons of oil-based capacity, compared with an annual demand of 50 million tons.
Yann Cohen, the National Leader for Chemical Industry at Deloitte China, said the projection is conservative as it doesn't include coal-based projects that haven't yet secured final government approval.
While pursuing the coal-to-olefin strategy, China is adopting a structured approach to avoid overheated and disorderly investment. The National Development and Reform Commission, the top planning agency, is managing the site selection, pace and technology requirements of new coal-to-olefin projects to reduce energy consumption and environmental impact.
Dow Chemical Co and top Chinese coal producer Shenhua Group have been waiting for approval for their US$10 billion coal-to-chemicals project in Shaanxi Province for years.
The coal-to-olefin industry also presents challenges and risks such as the price and quality consistency of coal, water supply accessibility, and costs.
"One major uncertainty of CTO projects involves carbon tax," Cohen said. "And this may offset the cost advantages of CTO projects.
Using coal to produce olefins is currently explored to complement the traditional oil route in the face of high oil prices. China is the world's largest coal producer but relies on imports for more than half of its petroleum needs.
Olefins, such as ethylene and propylene, are used in the production of petrochemicals and polymers.
In its report, Deloitte forecast China's olefin capacity to reach 56 million tons at minimum by the end of 2015, including 51 million tons of oil-based capacity, compared with an annual demand of 50 million tons.
Yann Cohen, the National Leader for Chemical Industry at Deloitte China, said the projection is conservative as it doesn't include coal-based projects that haven't yet secured final government approval.
While pursuing the coal-to-olefin strategy, China is adopting a structured approach to avoid overheated and disorderly investment. The National Development and Reform Commission, the top planning agency, is managing the site selection, pace and technology requirements of new coal-to-olefin projects to reduce energy consumption and environmental impact.
Dow Chemical Co and top Chinese coal producer Shenhua Group have been waiting for approval for their US$10 billion coal-to-chemicals project in Shaanxi Province for years.
The coal-to-olefin industry also presents challenges and risks such as the price and quality consistency of coal, water supply accessibility, and costs.
"One major uncertainty of CTO projects involves carbon tax," Cohen said. "And this may offset the cost advantages of CTO projects.
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