(chinadaily.com.cn)
Updated: 2007-07-25 11:27

Incomplete statistics show that foreign companies are flocking into China's coal chemical industry with as much as 382 billion yuan (US$50.5 billion).

Recently, Charoen Pokphand Group (CP Group) from Thailand brought 13 billion yuan to Aksu in the Xinjiang Uygur Autonomous Region, and General Electric Company (GE) from the United States invested 14 billion yuan in Suzhou of East China's Anhui Province for two separate coal chemical projects.

Xie Bing, president of the energy branch of CP Group inked an agreement with Aksu officials, marking the start of their cooperation in running a 13 billion yuan base producing 1.8 million tons of methanol and 600,000 tons of alkene annually. The agreement came two years after the company's 2.5 billion yuan project with Henan Yongcheng Coal and Electricity Group Co Ltd.

Almost at the same time, GE agreed with Suzhou to invest 14 billion yuan in a 120 hectare plant to turn out two million tons of DME annually while consuming 5.3 million tons of coal every year.

China's coal chemical industry has attracted attention or funds from foreign companies, including Anglo American, GE, Shell, Total, Dow, and International Finance Corporation, since 2006.

Investments in the industry from those firms and some Hong Kong companies amount to 382 billion yuan, almost two thirds of China's 600 billion yuan budget for the 11th Five-Year Plan period (2006-2010).

Almost all projects relying on foreign investment, including projects involving CP Group and GE, are located in the seven coal chemical zones planned by the National Development and Reform Commission (NDRC).

According to a circular released by NDRC, in the next 13 years, China will spend one trillion yuan on building seven coal chemistry regions, including in the middle and lower reaches of the Yellow River, eastern Inner Mongolia Autonomous Region, eastern Heilongjiang Province, Xinjiang Uygur Autonomous Region, the Central Plains, Yunnan and Guizhou provinces, and Jiangsu, Shandong, Henan and Anhui provinces.

Situated in Xinjiang Uygur Autonomous Region, Aksu has 10.96 billion tons of coal reserves, accounting for 90 percent of the proven total in southern Xinjiang. At one location in Aksu, where one billion tons of coal reserves were discovered, is now turning out four million tons of coal annually. Aksu also has 88.58 percent of oil reserves (520 million tons) and 93 percent of natural gas reserves (640 billion cubic meters) of the Tarim Basin.

Anhui city, Suzhou has six billion tons of proven coal reserves, accounting for 75 percent of all coal reserves in the north bank region of Huaihe River. Over 60 billion cubic meters of natural gas has also been detected there.

In spite of the city's rich coal reserves and excellent water resources, officials from NDRC of Suzhou worried that the city may not be able to satisfy the coal hungry coal chemistry industry. One official said that a 5.3 million ton coal chemical project is heavy burden to Suzhou because even before the project starts, the city has to struggle to provide enough coal for electricity plants to power East China. Then it is only a matter of time before Suzhou runs out of coal once the project begins.

The official added that it is still unrealistic to establish larger scale coal chemical plants in Suzhou. The silence from Suzhou's partner GE seems to support his point of view. No progress has been made since the two parties signed their agreement.

In fact, more than half of the foreign funded projects have not been approved by the government. Last July, NDRC stopped approving coal chemical projects in order to save water and boost coal consumption efficiency. Another announcement by NDRC at the end of 2006 saw implored the industry not to loose control.

Moreover, big scale chemical projects are currently controversial in the country, which helps to limit investment in such projects.