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More Mongolian coal gasification and coal liquefaction plans will be shared at World Clean Coal Conference, Mongolia 2015!
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Flowing fast?: Coal-to-liquid technology is considered a possible new energy source
By Oxford Business Group, 2013

The ongoing search for fuel alternatives in Mongolia was stepped up after a shortage in the summer of 2011, and energy sector leaders are now exploring alternatives and supplements to buying from Russian state energy firm Rosneft. One possibility is coal-to-liquids (CTL) technology, a good fit given the country’s huge coal reserves. Several companies are in the process of evaluating CTL’s potential in Mongolia, but as of late 2012 none had progressed beyond feasibility studies.

CTL is not a new process – petroleum-poor Nazi Germany used it, and the world’s largest operations are found in South Africa, another politically isolated country unable to rely on imported fuel. CTL provided about 90% of national fuels to Germany in 1944, and about 30% of transportation fuels in today’s South Africa.

Turning coal into liquid fuels can be done directly by dissolving coal in a water-based solvent and heating it to high temperatures, then refining the liquid to remove impurities. An indirect method involves extracting and capturing gaseous energy from coal (a combination of hydrogen and carbon monoxide) and then liquefying that gas using the Fischer-Tropsch Process, a method that is also deployed in gas-to-liquid (GTL) processes. Like CTL however, GTL is an old technology that was shelved until oil prices rose to the point where the method was considered financially competitive.

CUTTING CARBON: In addition to the costs involved, a significant objection to CTL projects is carbon emissions – the process is not clean. However Mongolia may present a unique set of factors, as its current energy profile is more emissions-intensive than the CTL process. Particularly on the outskirts of Ulaanbaatar, tent-dwellers who lack access to the electricity grid burn coal to stay warm in winter, and the resulting pollution makes the city one of the world’s most polluted during those winter months. If the CTL process were able to create fuels to replace that coal, or if CTL processes were able to aid in removing other bottlenecks to accessing electricity and heat, it could help reduce overall carbon emissions now coming from Mongolia’s energy use.

In the current economic climate, countries considering CTL are typically short on petroleum but long on coal resources, and that includes China. Shenhua Energy, a potential partner in Mongolia’s massive Tavan Tolgoi coal project, finished a CTL plant in the Chinese province of Inner Mongolia in 2008 that, once fully expanded, is expected to have a capacity of 1m tonnes per year. The company hired the South African chemicals-and-energy company Sasol to help build it.

UNDER WAY: In Mongolia, there are several existing CTL projects that have been reported to be at various stages of progress, and government officials said in 2012 that production would come within three years. MCS Group and Mongolyn Alt, two of the country's larger conglomerates, are planning a project in cooperation with SOD Mongol Group, a fuels importer and distributor, for a CTL plant that would produce 420,000 tonnes of synthetic die sel fuel a year. MCS has also been reported to be in partnership with Petrovis, the country’s largest fuel importer and distributor, for an equipment-supply contract with Germany’s Lurgi AG to provide Fischer-Tropsch technology. Energy Resources, which falls under a corporate umbrella also containing a coal mine and a licence to build a railroad to the Chinese border, is working with South Korean steel company Posco Energy on a feasibility study for a CTL plant.

CONCERNS: One concern to investing in CTL is the potential for increased political risk. The National Security Council of Mongolia (NCSM) has interfered with the licencing process for CTL-related projects, urging that permissions be revoked at some points and granted at others, according to a report by the US embassy in Ulaanbaatar. US diplomats consider the council's involvement in commercial matters to be "highly politicised".

"NSCM involvement was justified on the grounds that neither parliament nor the GOM [government of Mongolia] would be able to render appropriate, timely decisions on projects in question, necessitating definitive action by the NCSM in order to address perceived threats to national security," said the embassy report.

Extracting clean materials from coal in Mongolia
By POSCO, Aug. 30, 2013

- Establishing `Coal to Liquid` plant with Mongolia`s largest private company, MCS
- Joint venture `Baganuur Energy Corporation` project to start
- Plans to produce 450,000 tons of diesel oil and 100,000 tons of dimethyl ether annually


POSCO is speeding up the clean CTL (Coal to Liquid) project with Mongolia`s largest private company, MCS.

The Coal to Liquid (CTL) process produces a liquid-type fuel from coal that can replace oil, and has greater cost competitiveness over imported diesel oil. Further, less sulfuric acid and nitric acid are produced than when coal is directly burned, while most of the carbon dioxide formed can be collected and recycled for industrial use, having an effect of reducing air pollution.

This project utilizes low quality coal that is abundant in the Mongolian region, ranked in the top 10 countries in size of coal reserves, to produce a compound gas of hydrogen and carbon monoxide, and applies clean CTL technology to remove pollutants. POSCO and MCS plan on producing 450,000 tons of diesel oil and 100,000 tons of dimethyl ether annually.

Of these, dimethyl ether, a compound material extracted from the compound gas made from pyrolyzing coal, is lower in price than LPG and causes less carbon dioxide and ash, and is in the spotlight as an environment friendly fuel to replace fossil fuels.

POSCO and MCS started discussing this project in 2010. After Hatch, the Canadian CTL plant engineering specialist, confirmed economic feasibility of the project, the joint venture Baganuur Energy Corporation was established in May and is in the process of selecting technicians and receiving approvals and permissions of the Mongolian government to proceed with the project.

The Mongolian government recognizes the importance of the project from two perspectives—securing a stable energy source and developing an environmentally friendly power plant business—and is offering full support to successful proceeding such as applying no taxes on imported materials and equipment for constructing the plant.

The Mongolian government is proactively supporting the project because, although it is one of the world`s top 10 resource-rich countries, it imports most of its oil from Russia.

With the rapid economic development of Mongolia, the current annual 800,000 ton fuel consumption is expected to reach 3.5 million tons by 2020. As fossil fuel usage increases, Mongolia`s environmental pollution has also become a social issue. Air pollution in Ulaanbaatar, the country`s capital where about half of the population resides, has already reached serious levels.

Mongolia, through the CTL project, expects to solve the air pollution issue by self-supplying environmentally friendly fuel, and also replace fuels imported from overseas.

Through this project, POSCO also plans to lead the global clean energy plant business based on accumulated coal processing and energy production technology and operation management experience, and in the mid- to long-term, take an advantageous position in securing natural resources in Central Asia, including Mongolia.

Coal gasification plant to be built from Mongolia and Germany’s diplomatic partnership
By B. Byambadorj, April 17, 2012

This is an interview with Ts. Garamjav, the Deputy Minister of Mineral Resources and Energy (MMRE) about the new coal gasification plant to be built in Mongolia through partnership with Germany.
-It was decided that the coal gasification plant would be built in cooperation with Germany. What were the initial steps that had to be taken?
-Initial steps have been taken towards the construction of the gasification plant. Mongolian MCS and MAK Groups along with Tsetsens Mining and Energy have set the foundation to start a business partnership with the German conglomerate Siemens and Tussen Group. Additionally, MCS Group and Petrovis LLC made a coal liquefaction equipment supply contract with Germany’s Lurgi AG, based on the Fischer-Tropsch technology.


It is reasonable to understand that the most significant agreements and contracts on building a coal gasification plant in Mongolia have already been done. We have also talked about producing coking coal and building ferrous and non-ferrous metallurgy in Mongolia.

A lot of heat or thermal energy can be extracted from a coal coking plant, and we have also seized the opportunity and signed contracts with German parties on cooperating on generating electricity utilizing this method. Introducing the worldwide accepted, advanced technology of Germany to Mongolia is a big step for us. We have talked about and admired the high-end technologies of Germany for many years and we are now finally bringing them to Mongolia.

These national level business partnerships with Germany have mostly been initiated through the high-level diplomatic visits made by President Ts. Elbegdorj.

-When will the coal gasification plant be operational?
-The first coal gasification plants of Mongolia will be up and running in less than three years.
The coking plant is due to be in operation very soon. Technical and economic assessments on the coking plant have already been completed; specialists from both countries are conducting research on the plant. They are currently choosing and buying machinery and equipment. A major problem we are facing in constructing and operating the plant is the infrastructure of Mongolia. We have discussed the issue during our visit to Germany. We hope that this problem will be fixed soon.

-Where will the coal refining plants will be built?
-We see the Sainshand Industrial Complex as a possibility.

-How will Germany work with Mongolia on constructing the Mining Academy?
-There are not many engineers today that can work with Siemens technology. Most Mongolian engineers are accustomed to Russian technology. If they learn to work with Siemens, it will greatly speed up our mining sector. This is the aim of the new Mining Academy. We are partnering up with Germany on all levels of study – research, workshops and advanced training. Once the Academy is established, many German teachers, engineers, and professionals in mining will arrive in Mongolia.

Mongolia to produce liquid gas
November 23, 2013

The Ministry of Mining of Mongolia and the “SINOPEC” China Petroleum & Chemical Corporation have signed a MOU to build a coal gasification plant in Mongolia.

When the plant operates, Mongolia will not only be able to produce gas fuel to meet domestic demands, but also to export it. The plant will have the capacity to produce 15 billion metric tons of gas fuel per year according to preliminary estimates. In order to produce the target amount of gas fuel, approximately 50 million tons of brown coal will be required, at the estimated cost of one billion USD.

The gasification plant will produce environmentally friendly gas fuel that doesn’t generate waste.

The Ministry of Economic Development and the Ministry of Construction and Urban Development will make a planning of establishing a gas pipe network.

New Vision - The Potential for coal gasification and coal chemical industry development in Mongolia
By Leo Liu, September 6, 2012

Gasification is a process through which coal can be transformed into power, chemicals, hydrogen and transportation fuels, capturing the resulting carbon by-product from the coal for sequestration or for enhanced oil recovery.
Currently, the main markets for gasification, as judged by analysis of current and planned projects, are:
1. Electric Power
2. Chemicals
3. Liquids fuels (or coal-to-liquids, primarily transportation fuels)
4. Gaseous fuels (synthetic natural gas or hydrogen H 2 , for example)


Figure 1. World Gasification Capacity and Planned Growth - by Product

Source: U.S. Department of Energy
Compared to other technologies that either produce the same products or use the same feed stocks, gasification has several advantages that make it an attractive technology both now and for the future.
According to the U.S. Department of Energy, the major advantages include:

1. Product flexibility - A variety of commodities can be produced from synthesis gas (syngas), the primary product of gasification. Prominent among these are methanol, and ammonia, both of which are important as key building blocks for further chemical synthesis.
2. Low Emission - Gasification systems can achieve dramatic lower emissions levels, as the syngas produced is at higher temperature and pressure, which allows for easier removal of sulfur (SO X ), nitrous oxides (NO X ) and lends itself to efficient carbon dioxide (CO 2 ) removal as well.
3. Feedstock Flexibility - Several gasification plant designs have been developed to accommodate various grades of coal in addition to waste and biomass. The main feedstock could be lignite coal, the lowest end of coal with high moisture content, which is typically burned in power plants for electrical production.
4. High Efficiency - Steam produced by the gasification process can often be effectively integrated to meet a chemical plant needs, increasing efficiency. Integrated gasification combined cycle (IGCC) power plants offer efficiencies better than other coal power plants.

New Coal Chemical Industry : Stable Application
The coal chemical industry can be divided into traditional coal chemical and new coal chemical industries. The former mainly includes production of synthetic ammonia, coke, calcium carbide and other sub-sectors, while the new coal chemical industry produces petroleum substitutes, including ethylene glycol, oil, olefins, etc.
Figure 2. New Coal chemical industry supply chain

1. Profitable
- Many chemicals are high-value products, and gasification provides the option of using relatively inexpensive coal to produce them. Modern coal chemical products such as those listed above are also the commodity products from traditional petrochemicals, with the same product quality and downstream usage. Bank of China securities estimated that when oil prices are above $60/barrel, modern coal chemical are feasible from a project economics point of view.
On July 18 2012, WTI oil climbed above $90/barrel for the first time since May, which provides good opportunities for the development of a cost competitive coal chemical industry, and then to realize the supplement and partial substitute for oil resources.
2. Reliable - Coal-to-chemicals technology is seeing a large market growth, especially in China, indicating confidence in the technology. The quickly growing Chinese economy has given rise to a number of coal-to-chemical facilities. According to the U.S. National Energy Technology Laboratory, there are currently 34 such facilities in operation, with six slated to come online and many planned for the near future.
Other Applications
Coal-to-oil: Some pilot projects (including those of China Shenhua) are already able to run on a large scale. According to the China International Capital Corporation ( CICC ) point of view, coal-to-oil conversion is more likely to be just a technologically strategic move, and investors should not have high expectations for massive production in the near term.
Coal-to-natural gas : Coal-to-natural gas will likely be an important alternative to LPG and conventional natural gas because of the advantages. 1) Higher energy conversion efficiency of coal-gas; 2) water consumption is relatively small in the coal chemical industry.
The production of chemicals from coal through gasification has already carved out a share of the chemicals market. One important example is the production of methanol, of which 9% worldwide is produced by gasification (Gasification, Higman C., Van der Burgt M., 2003).
Three Drivers for New Coal Chemical Industry Development in Mongolia
1. Abundant coal resources, providing the low price coal feed
Due to insufficient oil and natural gas, coal is and will remain Mongolia's primary energy resource. According to the Ministry of Fuel and Energy Mongolia, the country has abundant coal reserves over 150 billion tons (the world's third largest) and can produce cost competitive coal by large-scale open-pit mining.
Figure 3. Preliminary estimates of production volumes from the major mines in Southern Mongolia

Source: World Bank report - Southern Mongolia Infrastructure Strategy
2. Surging demand for energy and chemical products
Forced to import virtually all of its refined oil products and frequently facing chronic fuel shortages, Mongolia plans to start building an oil refinery early next year in an effort to meet domestic demand and reduce dependence on neighboring Russia for energy supplies.
In the meantime, Mongolia faces growing demand for chemical products imported from China and Russia, like ammonia-based fertilizers and methanol, for direct use and as a building block in other chemical syntheses.
3. Government policy and support
According to the Fuel Policy and Regulation Department of the Ministry of Fuel and Energy Mongolia, the government coal policy is "aimed to provide national security and sustainable development of Mongolia by introducing economic and environmental friendly clean coal technology and production such as coal liquefaction, coal gasification and coal-chemical industry development."
The Mongolian government has been intending to limit fossil fuel imports for quite some time, and instead, to increasingly utilize its abundant domestic coal deposits. As a primary measure, the Mongolian government intends to build a coal-to-liquids plant in Mongolia to produce synthetic fuels from coal. In April 2012, the Mongolian government signed a Memorandum of Understanding ( MOU ) with Germany's ThyssenKrupp Uhde to implement a Coal-to-Liquid plant ( CTL ). The project's total cost is estimated to be EUR1.7bn (USD 2.1Bn), and the plant's annual production capacity will be 1 million tonnes of gasoline and diesel, and 275,000 tonnes of liquid gas using 6 million tonnes of brown coal, according to Eurasia Capital.

Challenges for Development
1. Transportation
Carrying more than 90% of freight, the Mongolian railway system is 1815 km long, of which 1,100 km are the main lines linking Russia to China. With the additional new prospect of transporting significant mining output to China, there is some concern that the existing single track railway linking Russia to China through Ulaanbaatar might not have sufficient capacity. The Government of Mongolia has been seeking to build a strong logistics network to enhance the country's competitiveness, and has been taking steps to enhance trade facilitation.
2. Technologically intensive
Most cutting-edge chemical production technologies are more complex than that found in the traditional petrochemical industry. New coal chemical technology has been developing rapidly in recent years, but have not fully matured as yet. According to CICC, experiences from the operational performance of demonstration coal chemical projects in China, show the technology is getting more mature in such order: coal to ethylene glycol->indirect coal liquefaction ->coal to natural gas-> coal to olefins.
Figure 4. Worldwide commercial coal chemical projects

Source: CICC
3. Resource intensive
Coal chemical production requires a great amount of coal and water. Mongolia has tremendous coal resources, but an uneven distribution of water -- the north has significant sources, while the south is desert. All surface water in Mongolia is covered by ice for about six months a year, and so groundwater is the primary source of water supply for major urban and industrial centers. Having adequate groundwater is crucial in coal chemical plant capacity design and site selection.
Figure 5. Current China coal chemical projects unit consumption by products (tons/tons, tons/'000 Mn cubic meters)
Application Standard Coal
CO 2
Indirect coal liquefaction 4.39 13 5
Coal to olefins 6.68 33 5.5
Coal to ethylene glycol 2.55 14 2
Coal to nature gas 2.83 6.58 2.5

Source: CICC
4. Capital intensive
The coal chemical industry is rather capital intensive and dependent on economies of scale, with most application project capital cost amounting to billions of dollars.
Figure 6. New coal chemical industry forecast capital cost per unit capacity
(US$ Mm/'0000 tonnes, US$ Mm/'000 million cubic meters)

Source: China Sealand Securities
Without enough domestic funds to develop the coal chemical industry, Mongolia needs to attract the financial strength of international coal and chemical companies to tap into in this sector.

Investment Vehicles
North American investors can share the gain of the new coal chemical industry emerging in Mongolia by gaining the exposure to the stock of the publicly listing companies that have dedicate themselves to the coal chemical development in Mongolia. Such companies include ThyssenKrupp Uhde (TYEKF.PK), KBR ( KBR ), Fluor (FLR ), GE Energy (GE), Siemens Energy (SI) and Prophecy Coal Corp. (PRPCF.PK).
(Declare: I have no positions in stocks for the companies listed above, and no plans to initiate any positions within the next 1 month).

Mongolia's burgeoning coal chemical industry is in an inevitable trend of development, and it is one that will take full advantage of the country's abundant coal resources, reduce its imports of energy and satisfy the surging demand for chemicals from China and Russia.

Healthy and orderly development is needed for this industry, giving full consideration to the resources and environment carrying capacity, with a steady to moderate push into the development process to achieve the goal of economic benefits and environmental carrying balance.

MCS, MAK plan for coal-to-liquid fuel production by 2016
By Udriin Sonin, May 17, 2012

At a forum for the mining industry MCS revealed its plans to begin operations for synthetic diesel fuel derived from coal in the next four year.

On the last day of the 90 Years of the Mining Industry summit, coal became a central point of discussion. Mongolyn Alt (MAK) LLC and MCS Group presented their jointly planned project with SOD Mongol Group LLC for the production of 420,000 tons of synthetic coal-to-liquid (CTL) diesel fuel from coal.


Mongolia's potential for producing synthetic diesel fuel has garnered the attention of countries with limited oil supply, such as the United States, Australia, China, and India. At the summit it was noted that Mongolia has some of the greatest opportunities for producing coal-to-fuel synthetic diesel. In China has halted all but a few similar projects with this aim. In Indonesia a factory is due to open soon, and there is news of similar factories to open in India and Canada.

This kind of production would require large water resources and the construction of complementary infrastructure to the industry. The project would also require investment, and MCS is already looking to some Korean companies to assist with the financing. As for manpower, the project currently employs 600 people but would potentially require 6,000 workers.

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