Iyaxin.com (Chief correspondent: Liu Shucheng; Correspondent: Kangyan) On August 21, reporters learnt from Yili New Industrialization Leading Group Office, the first cubic meter of SNG produced in Xinjiang has entered into West-East Natural Gas Transmission pipelines on August 20. The SNG came from Xinjiang Kingho’s 5.5b Cubic Meters/Y SNG Project, which construction was undertaken by Xinjiang Kingho Group. Located in Yining Yidong Industry Park, it is the first state-approved SNG project in Xinjiang.
    According to Wan Fang, Key Project Head of Yili New Industrialization Leading Group Office, Xinjiang Kingho’s 5.5b Cubic Meters/Y SNG Project is the first state-approved SNG demonstration project during the State’s 12th Five-Year Plan period. With a total investment of RMB 26.438 billion, trial production of its Phase I (1.35 billion cubic meters/ year SNG project) and supporting facilities construction has started. It is estimated that the annual output of Phase I can reach about RMB 3 billion.
    After completion of the entire project, the annual sales income can reach RMB 15 billion and after-tax profit can be RMB 2.5 billion; 10,000 employees will be directly employed.
    “Yili has abundant coal and water resources and natural gas pipeline network. It is an ideal place to develop large-scale SNG project. The advantaged natural resources make Yili become a pioneer of Xinjiang’s SNG project”, said Wan Fang. Currently, among the state-approved SNG projects in Xinjiang, 3 projects with an annual yield of 13.5 billion cubic meters of SNG are listed in Yili. In addition to Kingho’s SNG project, another two are respectively China Power Investment’s 6b Cubic Meters/Year SNG Project and Xinwen’s 2b Cubic Meters/Year SNG Project.
    According to relevant agreements, the SNG produced in Yili is chiefly imported into the West-East Natural Gas Transmission pipeline network. The West-East Natural Gas Transmission pipelines pass through Yili, and PetroChina also specially built CNG station there to import the SNG gathered totally into Line 2 or Line 3 of the West-East Natural Gas Transmission pipelines to ensure the safe export of SNG.
    Xinjiang Kinghu Energy Group Co., Ltd. is subordinated to China Kingho Energy Group Co., Ltd. The Group entered Xinjiang in 2009 and built Kingho Circular Economy Park in Yining County of Yili Prefecture. The park regards the achievement of coal lean energy utilization and improvement the added value of coal resources utilization and focuses on the development of large-scale coal-based synthetic natural gas industrial system.
    Last year, Xinjiang Kingho Energy Group’s SNG project was approved by the state, the people’s government of Xinjiang Uyghur Autonomous Region signed agreement with CNPC on the network access price of the SNG of Xinjiang Kingho, and the Autonomous Region completed exploration right transformation for the coal resources allocated to Kingho Group.
    Gan Xuchun, Head of Xinjiang Uyghur Autonomous Region Development and Reform Commission Economic Research Institute, said that Xinjiang Kingho’s 5.5b Cubic Meters/Y SNG Project is another landmark project in Xinjiang’s energy development and construction after the Central Committee of CPC’s working conference on Xinjiang’s work. The construction of the project will benefit the improvement of the demonstration level of SNG technology in Xinjiang and boost Xinjiang’s coal resource advantages to convert into economic advantages.
    Xinjiang’s SNG Industry Development Speeds Up
    As the first large-scale SNG project in Xinjiang, the commissioning of Kingho SNG Project becomes the start of the rapid development of Xinjiang’s coal gas industry.
    In recent years, the investigation in Xinjiang’s SNG project has been increasing. With the readiness of relevant preparation work of Sinopec’s Xinjiang-Zhejiang-Guangzhou Pipeline, Zhundong area of Xinjiang has gathered a number of large coal chemical projects. In addition to the State Council approved Xinjiang Zhundong SNG Demonstration Project, there are still five projects including Guanghui Energy’s 4b Cubic Meters/Year Coal Chemical Project and Henan Coal Chemical Industry Group’s coal chemical project. Currently, there are 14 SNG projects that have been approved by the Development and Reform Commission of Xinjiang Uyghur Autonomous Region are being constructed or will be constructed by 12 enterprises in Xinjiang, most concentrated in such areas rich in coal and water resources as Yili, Zhundong and Fuyun. According to the 12th Five-Year Plan of Xinjiang, 20 SNG projects have been listed as the construction goal of the autonomous region, with yearly gross production capacity hitting 76.7 billion cubic meters.
    After SNG project speeds up, only solving transportation channel can economic benefit be achieved. At present, CNPC and Sinopec are planning 7 natural gas pipelines in Xinjiang to solve the output problem of Xinjiang’ SNG. It is predicted that the transmission capacity of the pipeline will hit 48 billion cubic meters each year.
    SNG like Game of Carbon Atom Exchanging Companion
    How does coal become gas? Simply speaking, this process is like the game that the l carbon atom (C) in coal constantly changes partner. Yesterday, Professor Huang Xueli of Xinjiang University introduced to the reporters the SNG process.
    According to Huang, the first step is that the crushed coal first has intimate contact with steam, which produces mixed gas through high-temperature reaction. It can be seen from the equation: coal (C) + water vapor (H2O) → Carbon monoxide (CO) + hydrogen (H2). The re-combination makes coal become the gas mixture of carbon monoxide and hydrogen, which was used to be called "water gas". After turning into gas from solid, coal becomes raw material of all kinds of coal chemical products.
    Although the first step is the reaction with water vapor, but the water consumption in this link is not high. Huang Xueli said that the link with large water consumption is the next gas purification process：“water gas” is purified into more pure gas through desulfurization and decarbonization for methanation. In this process, carbon atom (C) continues to “change partner”: the gas rich in carbon monoxide (CO) + hydrogen (3H2) → methane (CH4) + water (H2O). When the methane content in new gas reaches a certain standard, it can be dried and transmitted into pipeline, becoming the generally used natural gas.
    According to source, in terms of gasification and subsequent processing, there are many processes for SNG. The common processes include pulverized coal pressure gasification, BGL gasification, Texaco gasification, etc. These processes pose different requirements for raw materials and water consumption. According to industry experts, as the carbon content and thermal value of coal are different, specific gas production and water consumption are impossible to be indicated by simple unified data. However, the water consumption of SNG is relatively low in the coal chemical industry.
    Mining Cost of SNG Higher than that of Natural Gas
    Against the background that natural gas demands are increasing, whether SNG can become a powerful fulcrum to meet the gas needs of residents and enterprises after natural gas? Relative to natural gas, whether SNG has advantage in terms of coal gas production cost? Yesterday, Li Lingxuan, a senior analyst with chem99.com noted in a telephone interview with reporters that the production cost of SNG is higher than that of natural gas, but it is more competitive than natural gas in term of price.
    The cost of SNG is mainly affected by the price of coal. The cost of feed coal accounts for over 40%. 1,000 cubic meters of natural gas needs about 3 tons of coal and about 10 tons of water. Calculated as per that the factory price of SNG is 1.6 yuan/cubic meter, if the price of feed coal is less than RMB160/ton, it will be profitable.
    Wan Fang said that according to the cost estimate by relevant departments of the autonomous region, the cost price of Kingho’s SNG is RMB 1.6/cubic meter, plus the RMB 0.2/cubic meter of subsidiary by autonomous region, the factory price is RMB 1.8 /cubic meter.
    “Compared with the cost price of RMB 1.6/cubic meter, the mining cost per cubic meter is within RMB 1, so the cost of SNG is higher than that of natural gas”, said Li Lingxuan. But the selling price of natural gas is probably between RMB 2-4 per cubic meter, the cost price of the natural gas imported from Central Asia is RMB 2.5 per cubic meter, which does not include other costs, and the price of imported LNG is more than RMB 4 per cubic meter.
    Through preliminary statistics, Wang Xiaokun, a natural gas analyst with chem99.com, found that 3 among 9 SNG projects approved by the State Development and Reform Commission are located in Xinjiang. Other projects include Datong Coal Mine Group’s 4b Cubic Meters/Year Natural Gas Project, New Mongolian Group’s 4b Cubic Meters/Year SNG Project in Ordos, Guodian Mongolian Energy’s 4b Cubic Meters/Year SNG Project in Hinggan League. The investment of a 4b cubic meters/year SNG project is around RMB 25 billion.
    But previously the National Development and Reform Commission once had worry about the excessive applications of coal chemical projects nation wide and tightened the approval of coal chemical project. Especially in June 201, it released the Notice on Regulating Relevant Matters of SNG Industry Development, asking the local governments at all levels not to arbitrarily approve or record SNG projects before the state releases clear national industrial policies and that SNG and supporting products shall be approved by the National Development and Reform Commission (NDRC).
    Long-term repressed SNG Reportedly,-became the focus of attention of coal enterprises and natural gas user after the NDRC approved Xinjiang Kingho’s SNG Demonstration Project. According to the 12th Five-Year Planning of Modern Coal Chemical, the scale of SNG is 100 billion cubic meters, with a roughly estimated total investment of RMB 600 billion or so.
    “Currently, SNG is still far from becoming a powerful gas source guarantee after natural gas”, said Li Lingxuan. According to the 2012 Natural Gas Industry Operating Profile released by the NDRC this January, the domestic natural gas production in 2012 was 107.7 billion cubic meters, an increase of 6.5%, and the import of natural gas (including LNG) was 42.5 billion cubic meters, an increase of 31.1%; apparent consumption was 147.1 billion cubic meters, an increase of 13.0%. The SNG projects that have been put into production can not threaten the position of natural gas as main gas source. LNG accounts for 2-3% of domestic gas source, and SNG’s proportion is even lower than this. But in a long run, natural gas price is stepping forwards and will become a catalyst for the accelerated development of SNG industry.
    At present, domestic natural gas pricing system consists of three parts: wellhead price, urban gas station price and end-user price. The state has clearly listed the natural gas price reform as one of major targets of resource product price reform during the 12th Five-Year Plan period. It can be expected that the price of RMB 3.5 per cubic meters will become a general trend”, said Li Lingxuan.
    Since 1980s, China has begun to explore coal gas project. So far, industrial application stage has not yet been reached. The core technology of SNG process route is methanation technology, and now this technology has been proven and become sophisticated in foreign countries. China has not grasped large-scale high-temperature synthesis gas methanation process, and main technology depends on import.
    Li Lingxuan said that in popular term SNG can be produced by pouring water on coal. Now, the technical challenge of SNG project mainly lies in that the natural gas based on gasification needs to be purified and this is relatively difficult. The most important is that there are also a large number of carbon dioxide, sulfur compounds and some phenol-containing wastewater. If carbon dioxide is not disposed properly, it will cause serious environmental pollution.
    The circular economy development model of “minimization, recycling and re-use” is the development model of Xinjiang Kingho’s 5.5b Cubic Meters /Year SNG Project. “Our company adopts advanced pulverized coal gasification in combination with low-temperature methanol wash for purification, which significantly reduces pollutant emissions. The wastewater produced by the project is treated with sewage treatment device and then enter the recycle water device for recycled use after reaching Class-I standards, avoiding the impact of waste water on environment”, Xu Zhong, Secretary of CPC Committee and General Manager of Xinjiang Kingho Energy Group told the reporters.