Coal Liquefaction: Its Impact on the ASEAN Coal and Oil Markets

Antonio A. Ver, President, Founder, Asia Pacific Basin for Energy Strategies, President, H&WB (Pte Ltd) Corp.


Coal liquefaction is among the technologies offering an alternative to oil importation for countries with coal resources yet little or no oil.  The Philippines is envisioned to be the “Hub for Southeast Asia” for coal-to-liquid (CTL) fuels with the establishment of the first and only hybrid coal liquefaction plant, currently being developed by H&WB Corporation of the Philippines using proprietary technologies from the Headwaters Technology Innovation Group of the USA.  The vital feature of this technology and investment is its ability to produce fuels lower than present fuel prices.

A key advantage of all CTL products is their low sulfur content when compared to conventional petroleum products.  While Direct Coal Liquefaction (DCL) diesel would require blending to counter the high aromatics and low cetane, Indirect Coal Liquefaction (ICL) diesel can be used as a transportation fuel by itself, with little modification or blending required. ICL diesel has such good blend properties that it can be used as a stock to improve the qualities of poorer streams, such as DCL diesel.  A blend of ICL and DCL diesel would produce a transportation fuel that exceeds all current quality specifications.  Using this product in the domestic market would help provide a clean, reliable source of domestically produced fuel.

The role that DCL and ICL naphtha can play in future gasoline markets is not as clear as that of diesel. Both fuels have very low sulfur content that will be advantageous as a blend-stock. DCL naphtha has an octane rating that is likely near or just below most regional standards.  This stream may have better applications in the olefins market as a liquid steam cracker feed. An option for use of the DCL and ICL streams is as a substitute for crude oil instead of direct blending.

Low sulfur, premium fuel streams from coal liquefaction could fit well into the future ASEAN market. Due to the inability of regional refineries to keep up with product demand, the liquids produced from coal would likely be competing with marginal supply from the Middle East.  Blended DCL/ICL diesel fuel appears to be fungible throughout the market, with premiums available in markets where very low sulfur is required. The emergence of cleaner fuels such as those from CTL throughout the ASEAN region is expected to widen the spread between prices of clean and dirty products.

The use of domestic low rank coal, particularly from coal-importing countries like the Philippines, for coal liquefaction is not likely to affect the ASEAN coal market.  The recent focus of China on coal liquefaction and other clean coal technologies, however, is expected to affect the regional and worldwide supply, and prices, of steaming and coking coal.  An expansion of the supply capacity of Australia, China and Indonesia will be required to meet the increasing demand and curb prices.

[1] Mainly from Headwaters Technology Innovation Group, “Philippine Coal Hybrid Liquefaction Project Step-1 Initial Evaluation Final Report, submitted to H&WB Corporation, 2006.