China's coal-to-liquid frenzy has cooled after it exposed the country's many coal-rich provinces to huge investment risk. As a result, the government has called off several controversial projects.
"Although CTL was widely considered as a good way to expand the coal industry chain, it was still uncertain that the massive investment would be worthwhile in commercial operation," Zhou Dadi, the former director of the Energy Research Institute under the National Development and Reform Commission , told Xinhua at the ongoing China International Coal and Energy New Industry Expo 2008 here.
Early this month, the NDRC issued an order that all CTL projects except two involving the Shenhua Group should be stopped. "It aims to control the business risk of the country's CTL industry, which was still in an experimental stage," it said.
"Coal liquefaction is a technology-, talent- and capital-intensive project, but most domestic enterprises lack advanced technologies, management experience and equipment."
Zhou added the "technology bottlenecks many small CTL projects, of which many were financed by bank loans. It will be troublesome if the loans default, which will hurt the interests of many depositors."
"Small investment in CTL projects does not make sense. Heavy investment, however, is likely to turn sour if the mid-and-small enterprises cannot be freed from the technology obstacles."
He also expressed doubt about its profitability as coal prices continued to surge and oil began to plummet from its peak of 146.50 U.S. dollars per barrel in July.
Shenhua Group, the nation's largest coal company, announced at last year's expo it would produce China's first barrel of liquid fuel from coal in 2008. It would use self-owned technology known as direct coal liquefaction.
During an inspection tour in June 2006, Premier Wen Jiabao described the project as a major scientific and technological experiment. His comments came against a backdrop when oil imports had soared in recent years to fuel China's booming economy, spurring the nation to look for technologies that could turn some of its coal reserves, one of the world's largest, into fuel and other chemicals.
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