coal.jpgEnergy giant Royal Dutch Shell is hoping to sell its clean coal technology to Shenhua Group, China's biggest coal producer and the world's fifth largest, according to XFN-Asia.

Environmentalists may throw up their hands in horror, but with oil and natural gas prices soaring and coal in plentiful supply, it seems inevitable that China is going to use more of the latter and less of the former.

The challenge is to find cleaner ways to use coal and a clutch of western companies are currently courting China with “clean coal” technologies, such as gasification and coal-to-liquids (CTL).

In this latest deal, Anglo-Dutch energy giant has signed an agreement to study the technological and commercial feasibility of its CTL technology with Shenhua Ningxia Coal Industry Company, part of the Shenhua group.

Under the agreement, a plant will be built in northern China's Ningxia autonomous region, which supplies China with two thirds of its primary energy needs.

Despite the current interest, turning coal into liquid fuels is not a new idea. The original process was developed by German researchers Franz Fischer and Hans Tropsch in the 1920s and exploited by the Nazis during the second world war.

The Fischer-Tropsch process uses gasified coal to produce paraffin wax that can then be refined into various fuels, such as diesel and liquid petroleum gasses such as butane and propane.

While the technology for producing synthetic fuels from coal — or natural gas — has been around for decades, it was not profitable when oil prices were low. Today, of course, the economics are much more favourable particularly for a energy-hungry giant like China.

The China Daily, says Shenhua is making a big bet on coal liquefaction and plans to have eight projects in operation by 2010, producing 30m tons of liquid fuel a year.

Beijing-based Shenhua will start production at its first CTL project at the end of next year in the northwestern Ordos Basin. The project will supply 1m tons of oil products a year to north China.

As well as CTL, Shell has sold 15 licenses for its coal gasification technology to Chinese companies and is currently constructing a joint venture plant with Sinopec.

Clean coal technology is an area where China has little home-grown expertise and and so it is obliged to sign technology transfer accords with foreign companies such as Royal Dutch Shell and South Africa's Sasol — more on Sasol's China ambitions in this Mail & Guardian story.

Other big oil importers are just starting to explore potential of coal to reduce not just their energy bill but their political risk of heavy dependence on foreign oil.

Like China, the US also has abundant coal resources, and it is building its first CTL plant. But a US Senate committee has identified many risks associated with CTL, not least the high capital cost and environmental concerns about increased coal production and the CTL process itself.

Shell argues that burning the synthesis gas generated by the gasification of coal emits significantly lower quantities of greenhouse gases and pollutants than traditional coal burning and is the cleanest way to harness the energy potential of coal.

Environmentalists are split on the green credentials of “clean coal” technologies, particularly when it comes to global warming. The new technologies make it theoretically possible to lock greenhouse gases away, but such techniques are not proven. More on these issues here.

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