With world oil prices on a rollercoaster ride lately, the Chinese are more determined than ever to lessen their dependence on the precious commodity and exploit their abundant coal reserves.

In its latest 'China's New Coal Chemical Industry Report, 2011,' Research and Markets said China is aggressively expanding its coal chemical industry, and is poised to launch major projects in seven areas, namely, coal liquefaction, coal-to-gas, coal-to-olefins, coal-to-ammonia/urea, coal-to-glycol, low-rank coal upgrading, and coal-to-aromatics up through 2015.

It was an inevitable course for China. The country is poor in oil and gas, but richly abundant in coal. At the end of 2010 alone, its coal reserves were at 114.5 billion tons, representing 93.3 percent of its total energy reserves.

And with fears of an impending global recession, China is fast-tracking projects in its coal chemical industry.

As of August, there were 29 coal-to-olefins projects under construction or planning stage in China, with total olefin capacity output projected at more than 20 million tons per year. Total investment will exceed RMB 630 billion.

According to Research and Markets, the coal-to-oil sector is booming in China, with pre-construction studies, planning, fundraising and construction of large coal-to-oil projects already laid down and being carried out in provinces with coal resources.

The Shenhua Group company has begun direct coal liquefaction, and the first phase of its Inner Mongolia coal-to-oil project has an annual capacity of 1 million tons and an actual operating rate of 80 percent.

Coal to Gas Technology

At least nine coal-to-oil projects are already present in China, with annual capacity of 38.2 million tons and total investment of around RMB380 billion.

The same report also found the coal-to-gas technology sector is mature and promising in China. Through 2015, China's coal-to-gas projects will be mainly located in Shanxi, Shaanxi, western Inner Mongolia, Xinjiang, eastern Inner Mongolia, Yunnan and Guizhou. The coal-to-gas projects under construction or planning have a total capacity of above 150 billion m3.

Last year, China completed its pilot Shenhua Baotou Coal-to-Olefins Project in Baotou, Inner Mongolia. It is a large coal chemical project where coal is gasified and turned into methanol. The methanol is then transformed into olefin and the olefin is then polymerized into polyethylene and polypropylene.

Development of the coal-to-olefins industry will reduce China's dependency on foreign crude oil, and is a new approach to the sustainable development of China's petroleum and chemical industries.