Taiwan Sinopec Holds Mainland Coal Chemical Project

Recently, Taiwan Sinopec Development Corporation (Taiwan Sinopec) has confirmed that it will temporarily suspend the mainland coal chemical project with a total investment of RMB 4.5 billion.
Taiwan Sinopec stated that there are three main reasons for this project being shelved: sharp changes in the global petrochemical industry, rapid changes in global economic fundamentals, and deterioration of the investment environment in the mainland. The person in charge of the Sinopec Corp. of Taiwan stated that it would take a wait-and-see attitude towards this coal chemical project, because in the past year, the mainland’s investment environment has deteriorated mainly because of increased inflationary pressures, rising interest rates, and raw material prices such as steel products. The construction cost caused by the increase has risen sharply.
In addition, the National Development and Reform Commission recently issued the "Circular on Strengthening the Management of Coal-based Oil Projects" (hereinafter referred to as the "Notice"). The "Notice" indicated that only the direct liquefaction of coal from Shenhua Ordos and the indirect liquefaction project of Ningxia Ningdong Coal Co., Ltd., a joint venture between Shenhua Ning Coal and South Africa Sasol Company, can be continued. Experts of Shanghai Asia Chemical Consulting Co., Ltd. focusing on the field of coal chemical industry believe that the introduction of the “Notice” is mainly due to several considerations: First, the recent decline in international oil prices and the rapid rise in domestic coal prices have led to an increase in the economic risks of coal-to-oil projects; The coal liquefaction technology is still immature and needs to be verified by industrial demonstration facilities. Furthermore, the large amount of water demand and carbon dioxide emissions from coal liquefaction projects pose challenges to environmental protection; in addition, due to the increase in the prices of basic raw materials, the cost of coal chemical project construction increase rapidly. Although the "Notice" only targeted coal-based oil, it also had some influence on the confidence of potential investors in coal chemical industry. Prior to this, Taiwan Sinopec had sent general manager Cai Xijin to the mainland to understand. The head of Taiwan’s Sinopec Corp. also stated that the Development and Reform Commission has issued instructions that whether the coal-based oil projects that are shut down contain coal chemical projects must be understood.
In early 2007, Sinopec Taiwan submitted an application for the construction of a coal chemical project in the mainland, which has been approved by the mainland approval department and was approved by the Taiwan Investment Review Commission in March 2008. This is also the only large-scale coal chemical project approved by the mainland for Taiwanese companies.
According to the initial plan, Taiwan Sinopec will build a large-scale coal chemical project in Hebei and eventually produce 150,000 tons/year of caprolactam. This planning project will help Sinopec Taiwan expand its business scope, allowing the company's business to cover the fields from chemical fiber manufacturing to alternative energy.

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