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2011.9 PITTSBURGH

The Cleaner Coal Conversion &Utilization Technologies in

Shenhua and China

YuZhuo Zhang, Ph.D.President & CEO of Shenhua Group

ZhengPing LuPresident & CEO of China Shenhua Coal to Liquids & Chemicals Co.


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Corporate Profile of Shenhua Group

An integrated mega-large energy company with the businesses coveringmining, power, railway, port and coal to liquids & chemicals.

37 subsidiaries (Branches), 210,000 employees and RMB 530 billion totalassets (at end 2009)

One of the State-OwnedEnterprises (SOEs),established in 1995The largest coal company inChina and the largest coalsupplier in the world


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Shenhua Business 2010

Coal Production: 352 million tons (+7% than 2009)

Coal Trading: 440 million tons (+24%)

Power Generation: 160 billion kWh (+34%)

Revenues: RMB 217 billion (+35%)

Profit & Tax: RMB 57.5 billion (+24%)


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Items 5-Year

ObjectiveCoal Production 600 million ton/yr

Power GenerationCapacity 60 GW

Railway Length 3,000 km

Port Handling Capacity 230 million ton/yr Shipping Capacity 4 million ton

Coal-based Oil &Chemicals 5 million ton/yr Five in

One

National Institute ofClean & Low-carbon

Energy (NICE)

InternationalInstitute of Coal

Strategy

ShenhuaInstitute of

Management

Shenhua R&DInstitute

Science &Technology

Development Corp.

Shenhua Technology Innovation System


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Contents

Overview of Clean Coal Conversion in China1

Projects of Clean Coal Conversion in China2

Trend of Coal Conversion Tech. and Industries3

Concluding remarks4


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Increase coalutilizationefficiency

Reduce CO 2emission

Enhancesafety and

reliability oflong termproduction

Reduce

dependence onoil import

Reducepollution

Purposes ofClean CoalConversion

Industries

China actively develops clean coal conversion technologies Coal to liquids chemicals industry grows rapidly in recent years

Clean coal conversion: an inevitablechoice for sustainable development


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Contents




Concluding remarks4


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Major Clean Coal Conversion Demo Projectsin China

Key techniques Owner Kilo -ton/aConstruction

/OperationKey indicators

Shenhua DCLShenhua

Group1,080

Start-up in late 2008, operationfor accumulated 8,000-hours

Max: 100% ofcapacity

SYNFUELS CHINA slurrybed FT synthetic oil

Yi Tai,Inner

Mongolia160

Products produced in March2009, running for accumulated

9,600-hours

Max: 90% 110%of capacity

SYNFUELS CHINA slurrybed FT synthetic oil

Luan,Shanxi

160 Start-up in July 2009, runningfor accumulated 8,800-hours

Max: 50% 60%of capacity

SYNFUELS CHINA slurrybed FT synthetic oil (with

Shenhua catalyst)

ShenhuaGroup

180Start-up in July 2009, runningfor accumulated 1,300-hours

CO+H 2 conversionrate: >88%

Mobil MTG technologies

Shanxi

JinchengGroup 100Start-up in June 2009, running

for accumulated 8,000-hoursReached designed

capacity

DICP, Chinese Academy ofSciencess, MTO

technologiesShenhuaGroup

600Start-up in August 2010,

producing over 80,000 tons ofpoly-olefins the same year

MTO reached fullcapacity

FJIRSM, Chinese

Academy of SciencessCoal-to-MEG

Tongliao

Gold CoalChemical

200Construction completed,

products produced in late 2009 Max: 50% 70%of capacity


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Five coal-to-liquids demo projects up and running with total capacity of 1.68

MM ton/a (another 200,000 ton/a methanol-to-gasoline project under

construction)

One 600,000 ton/a MTO project running, construction of two projects being

completed with total capacity of 980,000 ton/a.

One 200,000 ton/a coal-to-MEG demo project just completed.

Four SNG demo projects approved and at preparation stage, with planned

annual capacity totaling 15.1 billion cubic meters.

Summary of industrial demonstration 13 projects

Major Clean Coal Conversion Demo Projectsin China


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Shenhua DCL Demonstration Project

1 MM ton/y DCL unit reached max. 100% of designed

capacity, coal conversion rate reached 91% of the design

and the DCL plant realized long-time steady operation.


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Licensor: SYNFUELS CHINA slurry bed FT synthetic oiltechnology with catalyst developed by ShenhuaLocation: Shenhua DCL demonstration project siteCapacity 180,000 tons/aConstruction completed: July 30, 2009. Commissioning inDec., 2009, stable operation of 255 hr. 2 nd commissioningin March 2010, stable operation of 1,113 hr.

Shenhua Indirect Coal to Liquids DemoProject


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SNG Demonstration Project

East No.2 blockof ShengliCoalfield

Four SNG demonstration projectsapproved. Located in Inner Mongolia,Liaoning and Xinjiang respectivelywith a total capacity of 15.1 billion m 3/y.

The 1 st project is Dangtangs 4 billionm3/y SNG project located in ShiketengBanner of Inner Mongolia. The firstphase project will be completed byJune 2012 with a capacity of 1.33billion m3/y and start to supply gas toBeijing with 400 km pipeline.

12mnM3/dSNG

project


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Shenhua CCS Demo Project

Feasibility Study started in 2007, concluded in Nov. 2009; Injecting CO2 from DCL plantclose to the DCL site.100 KTA CCS pilot plant successfully injected supercritical CO2 into the saline aquiferwith a depth of 2,243.6m on Jan 2nd, 2011.


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Different coal conversion processes: comparison and relationship

Coal to H2 is the simplest process while CTO is the longest one.

Coal conversion process analysis


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Industry value analysis Product Price RMB/T RMB/1000KWh

Product market is the main factor impacting the industry value of modern coal conversion



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In current market price, the value of CTL (either direct or indirect) and CTO arepromising

The current price of NG and H2 is only 30% of the oil product with the sameBTU and 20% of the olefin products with the same BTU.

According to oil/gas ratio in the current international market, if the price of natural gas or H2 can be 60% of oil with same BTU, the energy consumption,water consumption and pollutants emission per 10,000 industrial value-addedfor coal to SNG and H2 will be close to those in CTO.

For those areas with no NG, but a lot of Coal, Coal to SNG and H2 with CO2capture could provide the cleaner energy for the local market.

Industry value analysis



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Baotou MTO Refinery inSinopec

Competitiveness

The overall cost (taxexcl.) per ton of PE,when in full capacityis:

When oil atUSD80/barrel, in anintegrated large scalerefinery with a capacityof 1 MM t/a, the totalcost per ton of PE is:

PE, produced fromCTO is morecompetitive than thatderived from naptha,and the cost gap is

RMB6,985/t RMB

8870/tRMB

1885/t

Economics of CTO


S l i i di i f l


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NO 2

DCTL

NO 1

Coal to H2

NO 3

Coal to SNG

NO 4

Indirect CTL

NO 5Coal to

Methanoland DME

In terms of life cycle energy efficiency, coal-based olefin tosubstitute oil-derived olefin, and coal-based H2 to produce fuelcell for car use are the highest.

The lifecycle energy efficiency sequence among all moderncoal conversion technologies, compared with conventional oilroutes,is

Selecting strategic direction of coalconversion process


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Capacity by the end of the 12th Five-Year Plan period:CTL: 10MMTA

Coal-to-Methanol: 10.85MMTA (including methanolfrom MTO plant)

Coal-to-Olefins: 3.8MMTA

SNG: 1.7 bn m3/y

Total investment: over 100 billion RMB (excluding capitalcontribution from partners)

Shenhua Clean Coal Conversion Blueprintduring the 12th Five-Year Plan Period


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R&D on Clean Coal Conversion Technologies

Improve & optimize the DCL, ICL, Methanol-to-Olefins,Coal-to-EG technologies, and all of them have beendemoed in commercial plant; enhance product yield andreduce energy consumption;

Further R&D of SNG, MTG (methanol-to-gasoline) andMTA (methanol-to-aromatics) process, carry out scale-uptest and build commercial demo plants;Reduce the cost by optimizing above processes, andmaking those large equipments in China.

R&D on the polygen technology to commercialize polygen

plant by combining chemical synthesis and powergeneration;

R&D on CO2 mitigation, separation and recycle, storageand utilization (CCUS).


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Improvement, optimization and upgrade of the process used in the existing demo plants

E.g.: DMTO-II process development lead to methanol-to-olefins ratio from 3 tons:1 ton to 2.7 tons:1 ton. A 10,000t/a pilot plant was built in 2009 and all the tests were completed in 2010, showing that the technology isready to be commercialized.



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Explore the execution of clean coal conversion project

E.g.:Optimization of clean coal conversion process: Choose right technologyfor main units according to the properties of raw materials and productsto reduce capital cost, material consumption and energy consumption inorder to maximize the overall efficiency;Major & critical equipment manufacturing by domestic vendors: Forexample: large compressors, high pressure valves and high temperature/

high pressure reactors are currently imported. Domestic vendors needto produce those equipment for lower cost.



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Key Focus of Chinas CleanCoal Conversion R&D

Carbon Capture, Utilization and Storage (CCUS) Research

To conduct CCUS research on the basis of existing technologyand project demonstration:

CCS: to develop low-cost separation technology of CO 2,packaged technology for geological storage, storage safetymonitoring, evaluation system and alarm managementsystem; larger project needed.

CCU: to continue developing CO 2-EOR and CO 2 microalgae biofuel as well as to explore other CO 2applications for breakthroughs


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Contents




Concluding remarks4


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Concluding Remarks

As Chinas economy grows, from national energy and securityperspectives, coal conversion can be one of the important solutionsfor China to address the shortage of oil.

The overall energy efficiency sequence among all coal

conversion processes are: coal to H2, IGCC, coal to SNG, CTO,DCTL, coal to methanol, indirect CTL, coal to DME.


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The oil substitution efficiency for CTO and direct CTL is approximately2.45tce/toe relatively high and it has potential room to improve.

If the natural gas price is 60% of oil with the same BTU, the economicand environmental advantages of coal to SNG will appear. In addition,coal to natural gas, with 65% energy conversion efficiency, is an

efficient process. The oil substitution factor with coal can be2.15tce/toe which is quite promising and is of significant potential.

Concluding Remarks


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2011 9 PITTSBURGH

YuZhuo Zhang, Ph.D.President & CEO of Shenhua Group

ZhengPing LuPresident & CEO of China Shenhua Coal to Liquids & Chemicals Co.

pl2-1 - zhengping lu.publishable

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