Houston Firm In JV to Build Coal Gasification Plans In China

By John W. Miller 

Houston-based Synthesis Energy Systems, Inc. will announce a $105 million deal on Wednesday to help build three plants in China that turn coal into synthetic gas.

The deal for the U.S. chemical firm underscores the growing market in coal gasification as China looks to reduce carbon emissions while satisfying its voracious appetite for energy.

China and the U.S. last month agreed to new limits on carbon emissions, starting in 2025. Looking to deploy its seemingly infinite reserves of coal, China has been encouraging its state-backed companies to forge partnerships with Western chemicals companies.

It aims to increase its production of synthetic gas from coal to around 10% by 2020 from almost nothing a few years ago. There are currently 118 gasification plants in China, and another 60 under construction, according to an Energy Department database.

And over the past decade, U.S. and Western firms such as Dow Chemical Co. and Celanese Corp. have built plants in China that convert coal into gas, paint and plastics. China is a key market for these firms, which in their home markets face stagnant economies and pressures related to fears of environmental damage. Only a handful of companies are building gasification plants in the U.S. or Europe.

The three SES plants will all supply gas to aluminum smelters belonging to Aluminum Corp. of China, or Chalco, China's biggest aluminum producer. The plants, located in Shandong, Henan and Shanxi provinces, south of Beijing, make aluminum from the raw material alumina, a fiercely energy intensive process. China is the world's largest supplier and buyer of aluminum, producing and consuming around half the world's supply of the metal.

Gasifying coal produces less carbon dioxide than burning it, although it is still more polluting that ordinary natural gas, say energy experts.

SES's Chinese joint venture partner, Zhangjiagang Chemical Machinery Co., Ltd. will build the plants using SES technology and expertise. SES has already contributed to two plants in China.

Robert Rigdon, SES' president and chief executive, said the deal would help develop a market "for new plants and the retrofit of large numbers of existing facilities in the region," including for other industries.

SES announced the joint venture earlier this year. The deal to be announced Wednesday "helps validate our decision to joint venture our technology," said Mr. Rigdon.

Write to John W. Miller at [e-mail]

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