Chinese show interest in SNG plant

The Mongolian Mining Journal. /Feb.2019/

One of the proposed heavy industry projects that showed some progress is that on producing synthetic natural gas from coal. A feasibility study prepared by Wuhuan Engineering, a Chinese company, was submitted to the Ministry of Mining and Heavy Industry in May 2017, but not much seems to have happened since then. B.Temuujin, manager of the project, explains the situation to G. Iderkhangai.

Why have things been quiet since the feasibility study was approved by the Council of Science and Technology at the Ministry?     
Let me begin by giving your readers a little information on the project.When it was mooted in 2014,the idea was to produce and export 16 billion cubic metres (cbm) of synthetic natural gas (SNG). This has now been revised to produce 725 million cbm of SNG, which is what the domestic demand is expected to be in 2030. Such extensive domestic consumption is being planned as a measure to reduce air and other kinds of environmental pollution. 

At the same time, as a business venture, the project must be commercially viable. In Mongolia, when winter recedes, gas consumption will fall drastically, and we shall need, first, to store the unused gas for later distribution and, then, to think of a product to ensure the plant operates without interruption. Wuhuan Engineering, a Chinese company which won the tender bid, announced with funding from the World Bank, to prepare a feasibility study, was specifically told to provide for these two conditions. The study was approved by the Science and Technical Council of the Ministry of Mining and Heavy Industry (MMHI) in 2017. 

This is one of the largest projects included in the Government’s Action Plan. A project unit was set up at the MMHI in 2016. It has finished all the spadework and the next step is to establish a company to take charge of the project, conduct negotiations on several business areas, attract investment, and then start construction. 

How have talks gone with the three Chinese companies interested in investing in the project? 
China uses advanced technology in its coal-to-chemical plants, adapting Western practices to its own special needs. We think participation of Chinese companies will be good.To be a profitable business, the project must have long-term sales agreements. We shall start small, but we foresee a great future in which we go beyond extracting methane gas from coal, diversifying into producing various export items. 

The key buyer of the gas could be the China National Petroleum Corporation (CNPC), which controls 90 percent of the natural gas pipeline in China and has many subsidiaries.    

The plant is to be built somewhere in Bayandelger soum of Tuv aimag so that brown coal from Baganuur can be used. That would mean the gas transmission pipeline would run along the south of the Bogd Mountain. Is that right?
After conducting tests on coal from several areas, it has been decided that the plant will use coal from the Baganuur or the Nyalga-Choir deposit. The gasification technology has been selected. The pipeline to Ulaanbaatar will be built from the plant’s location in Bayandelger soum to the west along the south of the Bogd Mountain and through Zuun Mod, Khushig Valley, where the new airport is, to a point near the Car Trade Centre – the western most part of Ulaanbaatar. A central station will be built there to distribute the gas. Another such pipeline terminal and distribution station would be built in the vicinity of the Bayanzurkh checkpoint – almost the eastern most part of the city.    
We have received good support from the authorities in Tuv aimag. They have made all arrangements to make land available for the plant and the pipeline. 

Construction could not begin in 2018 but will annual coal extraction at Baganuur reach four million tonnes as called for in the feasibility study? 
Construction can start only when funding issues are resolved. That will be after the investor is chosen, and a joint venture company is established to negotiate with international lenders. This will be a long process, entailing the signing of some 20 agreements in different areas. The Government will also have to decide on whether the Mongolian partner in the joint venture will be a fully state-owned company, or one with private sector involvement.

The feasibility study says there should be four million tonnes of coal for use in production and 1.3 million tonnes more for the power plant. This means that the Baganuur mine would have to produce twice the amount it currently does. This needs careful planning, and we also have to try hard to lower the cost of production. Technical upgrading will be essential. 

Have you concluded an agreement with the Ulaanbaatar City authorities on the gas distribution?   
I think that the pipeline, distribution facilities, and such things would be under state ownership, though the private sector could be involved in the distribution network, in which case there would have to be such an agreement. The City’s involvement is very important in such matters as collecting payment for the gas consumed, and getting unencumbered land for the pipelines and distribution sub-stations. We have held discussions with the Capital City Master Plan Department and Ulaanbaatar City Corporation. There is also a plan to conduct,in cooperation with the master plan department, a detailed study on the ger district areas through which the pipeline will pass. We have laid out a tentative route for the pipeline. 

To go back to an earlier question, supply of SNG will help reduce air pollution in Ulaanbaatar. But what about gas storage and keeping the plant going in summer? 
The major source of air pollution in Ulaanbaatar is the raw coal burnt in the ger districts for heating.  The SNG should replace it. For easier storing, the gas can be compressed or liquefied. As for ensuring the plant’s continuous operation in the period of low consumption, we are still looking at options. 

What is done in the liquefaction process? 
Cooling natural gas to take a liquid form makes for ease and safety of non-pressurized storage or transport. It also takes up about 1/600th the volume of natural gas in the gaseous state. This liquefied natural gas or LNG is odourless, colourless, non-toxic and non-corrosive.Another option for storage is to produce methanol from the SNG, which can be used for several byproducts including gasoline. We can produce 326,000 tonnes of Euro 98 gasoline and if Ulaanbaatar’s public buses run on this, another major source of air pollution will be gone. We shall assure adequate supply but the price of the cleaner fuel will be a little higher than what is currently used, around $850/t. Even if there is no domestic demand, we should find it easy to sell this gasoline to our southern neighbour, where public transport in the big cities has changed over to this type of fuel. And maybe the Chinese investors will welcome and help in such export.

Another byproduct would be nitrogen fertilizer. It should be possible to produce 30,000 tonnes from the plant waste, an amount equal to 50 percent of our total import of it now. Some 60,000 tonnes of propane and butane gases will be produced too. They are the LPG that is used in households and cars. 

Our project is special in that it integrates the two principal techniques of transforming coal:coal-to-gas and coal-to-liquid. Our final product will be pure methane with 98 percent or more CH4. As it is produced by industrial methods, it is called synthetic natural gas. This methanol is the basis of many chemical products including plastics and fibre materials. 

All this sounds fine but many feel that the $2.5 billion needed for the project is too much and would be better used to build apartments for households in the ger districts. What do you say to this? 
At most 60,000 apartments can be built with the $2.5 billion, but we shall provide the means of heating 218,000 ger district households, which have over 3,000 boilers, and also supply gas for domestic use. Buses and taxis will also get cleaner fuel. We must see things from a wider perspective. Once SNG produced in Mongolia is in wide use, we shall spend considerably less on importing power and also reduce the overload on the current system.