By L.Bolormaa
Our future depends upon our mastery of technology. Japan and South Korea prosper by the power of their technology and German technology has become synonymous with the nation itself. In the world today a country cannot expect to develop without access to and use ofadvanced technology. Apart from the other captivating features of technology, its application has a special economic importance for Mongolia.
Our coal reserves amount to more than 170 billion tons, of which 100 billion is thermal coal and the rest brown coal, which is considered lower grade. However, we don’t have enough fuel for direct use in transport and industry. Is it possible to make such fuel from thermal coal? It would be a technological triumph for us if we can do that. All arguments and debates over mining and selling coal would pale into insignificance if the coal can be liquefied in a viable and economically sustainable manner. For the next generation of Mongolians, looking for that technology should be like the search for the Holy Grail.
Work on coal gasification technology has kept scientists busy for more than half a century. During World War II, Germans produced diesel from brown coal for their tanks and other vehicles of war, in a stunning technological innovation. The next leap in technologyin converting coal into energy came from South Africa.The Sasol factories there produce petrol and diesel from coal and natural gas, using the Fischer-Tropsch synthesis process for the purpose.They produce 7.5 million tons of fuel annually, while our country’s total fuel demand is much less than that. This is to Mongolia’s advantage, as new methods of coal gasification have meant that it is no longer necessary to build giant plants. China has successfully built factories with capacity to produce 200,000 tons of diesel. These would suit Mongolia well.
We do have companies seriously studying the possibility of producing petroleum from coal. Mongolyin Alt will use its Aduunchuluun brown coal mine for the trials, and Mongolian Industry its mine at Tugrug in Tuv aimag. MCS is working on making diesel from gasified coal. Their success could mark our future and become the basis of Mongolia’s economic security.
Readers will recall that in 2009, the Government of Mongolia prioritised projects on coal-based fuels as a means to achieving self-reliance in the oil sector. It listed 26 national-level megaprojects, chosen by the National Development and Innovation Committee from among 40 projects proposed by various Ministries. (The full list was published in our November, 2009 issue.) The Government promised all encouragement to the private sector in setting up these megaprojects. Individual companies were expected to be responsible for the preparation of technical and economic studies, and to resolve funding and personnel issues.
A coal gasification project will need an investment of between USD2 billion and USD3 billion. The goal is to produce gas from a solid substance, coal, and then liquefy that gas. This is bound to be an expensive procedure, and an interested company will naturally demand a stability agreement to protect its investment.
National fuel consumption has been growing every year and we have had fuel shortages in the last two years. Our oil reserves are not very high, and processing the crude inside the country will be able to meet only a part of the demand in the near future, with no end to imports.Another problem is that our projected crude output will not be enough to make the refineriesviable. A refinery cannot be economically and technically sustainable if its processing capacity is less than 2 million tons a year. As against this, we have to place the projection of the Petroleum Authority of Mongolia that in 2015, when domestic oil exploration will be at its peak, production would be no more than 1.1 million tons. We shall have to import crude to feed our refineries to keep them going. Three processing plants are on the anvil, will different sizes and capacity.They have already been granted the land permission in Darkhan, Zuunbayan and Sainshand respectively. But, as I said, even when they begin operations, their supply of fuel from domestic crude will not meet our total demand.
Diesel accounts for 60 percent of our total fuel consumption. Its use has been growing drastically over the last three years. B.Nergui, a leading expert in theDevelopment and Investment Policy department at the National Development and Innovation Committee, says that as mining, construction and agriculture increases, demand for diesel will grow until it reaches 2-3 million tons by 2020. Last year’s imports totalled 635.000 tons and this can only go up and up.
That underscores the urgent need to convert our coal to gas, a first step before conversioninto all types of liquid petroleum products. Coal will no longer be used in our power plants, or to produce fertilizer or even in a steel plant. Present estimates are that 80 percent of the total investment will be needed for the first step, the gasification, but liquefaction costs will be lower. This is the bright future we and the coal industry have in front of us. The time for debates over coal is over and we must look ahead to entering a brave new world with the help of technological innovation. It is possible with courage, conviction, and commitment.
By L.Bolormaa