China warns against "blind" rush to build coal-to-gas plants

BEIJING, July 22 Tue Jul 22, 2014 5:38am EDT

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BEIJING, July 22 (Reuters) - China has warned operators against "blindly" developing projects to turn coal into synthetic fuel, underlining the requirements needed for regulatory approval as companies rush into investments that are costly and might harm the environment.

The warning, published by the National Energy Administration (NEA) on its website (www.nea.gov.cn) on Tuesday, came days after plans to produce billions of cubic metres of gas from coal were described by a top government researcher as "irrational".

The government bans coal-to-gas plants that would produce less than 2 billion cubic metres a year and coal-to-oil projects smaller than one million tonnes a year, according to the NEA document.

Even projects meeting those guidelines must get approval from the State Council, China's cabinet, before construction can begin, it added.

"Some regions are highly enthusiastic about new projects. There are signs of blind development regardless of the environment, water resources, technology and financial capabilities," the statement said.

"It's strictly prohibited to build coal-to-oil and coal-to-gas plants in provinces that need to buy coal from other regions."

Natural gas is set to play a crucial role in China's war on pollution to reduce heavy reliance on coal, with the government aiming to boost total gas supplies to 420 billion cubic metres by 2020, which is 2.5 times the consumption last year.

But production from conventional gasfields has struggled to keep up with demand and China increasingly relies on supplies piped in from Central Asia plus long-term supply deals for liquefied natural gas. It hopes non-conventional sources like synthetic natural gas will help plug the gap.

Beijing has been cautious in approving coal-to-gas (CTG) investment, having given final approval to just four plants by the end of 2012, due to concern about coal supply, strain on already scarce water resources and large emissions of carbon dioxide.

But companies backed by regional authorities are proposing a total of 50 coal-to-gas plants, according to estimates by Greenpeace, which would exacerbate the water crisis in regions like Inner Mongolia in the north, and Xinjiang and Gansu in the northwest.

"Coal-to-gas production may bring relief to smog conditions in selected regions but will likely increase in coal consumption and carbon emission across the country," Greenpeace said in a statement last week. (Reporting by Chen Aizhu; Editing by Alan Raybould)

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