Localization of coal chemical equipment is now underway

The rising global oil prices have sparked a growing interest among the public in the early realization of coal-to-oil projects. Recently, the world's first coal direct liquefaction demonstration plant, the Shenhua Group’s one-million-ton coal direct liquefaction project, has entered the commissioning phase and is expected to begin commercial trial operations in the second half of the year. Industry experts are closely watching the performance of the first set of coal direct liquefaction technology and the stability of the equipment. They are also concerned about how the key components for multiple 5-million-ton coal-to-oil plants will be localized. The core equipment of the Shenhua project was largely imported. Since this is China’s first such project, there is no existing experience to rely on. Although the technology was developed domestically, the critical equipment still required foreign imports. This strategy, while reducing project risks, also means reliance on foreign suppliers, leading to higher investment and operational costs. The project's total investment has increased from an initial 7.9 billion yuan to 13 billion yuan, with a large portion allocated to equipment procurement and spare parts. Equipment costs now account for 53% of the total budget. Foreign suppliers have taken advantage of the situation, significantly increasing prices. For example, the cost of a high-thrust hydrogenation reciprocating pump rose from over $2 million to $3.6 million. A mechanical expert noted that similar equipment could be produced domestically for around 10 million yuan. However, due to time constraints and the need for success, Shenhua had no choice but to pay the premium. Currently, the project includes 2,860 movable and static equipment units, with 26% of them imported. Technology and equipment account for more than 35% of the total cost. The replacement of spare parts for these imported devices is also expensive. Securing two years’ worth of spare parts is equivalent to purchasing a new unit, and there is always the risk of being left without support if a failure occurs. Efforts are already underway to localize key equipment. Shenhua began planning for localization as early as 2002, collaborating with Shanghai Electric Group and Sinopec Engineering Construction Company (SEI) on several special projects. Over the past two years, some progress has been made. In the Shanghai base, coal slurry pumps developed by Shanghai Electric have performed well since their installation in 2006. Sealing issues have been addressed, and high-pressure coal slurry feed pumps have also seen improvements. These technologies have passed expert reviews and are now patented. Despite these achievements, challenges remain in system development, funding, talent, and domestic alloy materials. Public pilot platforms are still under discussion due to site selection and funding issues. Looking ahead, Shenhua plans to build a 3-million-ton indirect liquefaction plant in Ningxia and several other coal-to-liquid projects. Given the scale of these projects, the domestic equipment industry must step up its efforts to meet the demand for localized key components. Experts suggest that a coordinated approach is essential. A high-level platform involving government departments could help organize national resources, tackle key challenges, and enhance system integration. Increased financial support for R&D is also needed, as many companies struggle with low profits and limited resources. Additionally, there should be a focus on absorbing and re-innovating imported technologies, encouraging collaboration with international firms. Finally, establishing a public pilot platform for coal liquefaction equipment is urgently needed to accelerate development and ensure long-term success.

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