China’s annual output of oil produced from coal will rise to 4 mln tons by 2010, Zhang Yuzhou, Vice General Manager of Shenhua Group Corporation Ltd.
Despite the high facilities cost, about 7-10 times more expensive than a standard oil refinery, the high international oil price makes the facility profitable. Zhang said oil produced from the facility would be competitive if international oil prices fall to USD 30 per barrel. At USD 40 per barrel, the facility will pay for itself within 8 years. Zhang made his comments at the 2006 International Strategic Development and Investment Energy Summit in Beijing on Thursday.
Converting coal into oil requires a large amount of water. Some technology requires 8-12 tons of water for every ton of oil produced, making sites along rivers most suitable.
If a 10 mln ton coal-to-oil facility would require about 100 mln cubic meters of water a 50 mln ton facility would require about 1% of the annual flow of the Yellow River. Many regions of China already suffer from water shortages and pollution.
Wen Jiabao called oil from coal an important part of China’s national energy security during a visit to their plant, said Zhang.