A few months back I wrote about Asian innovation in energy, specifically about the expertise being developed by China in coal gasification. This past week, the first case of exporting this knowledge occurred when the government of the Ukraine announced that it is looking to China to help it begin the conversion of its power plants from natural gas to coal gasification.
The Ukraine is looking to this conversion because of the high price it is paying for natural gas being supplied by Russia. Recently, it paid $425 for 1000 cubic meters of gas, which equates to about $12 per MMBTU. For reference, this is less expensive than prices found in Asia, but more expensive than Western Europe.It’s not just about the price, though, it also revolves around security of energy supply. Because the major artery for gas from Russia to Europe runs through the Ukraine, the country is both a user of gas and the primary conduit for supply to Europe. This unique arrangement has resulted in a number of disagreements over the years, between Naftogaz Ukraine, Gazprom, and their respective governments. At one point, it was heated enough that Russia threatened to turn off the supply line. Things are much more stable now with mutual agreements in place. Because of this reliance on gas from others, though, the Ukraine desires better diversity of its energy supply and coal gasification is looked at as a viable option. By the way, it doesn’t hurt either that its coal supply is one of the largest in the world.
Although the potential supply is abundant, the quality is not as Ukrainian coal is low quality, with both high sulfur and ash content. This lignite is not a great fuel for conventional coal-fired boilers, but is a very good candidate for gasification, particularly when used in fluidized bed reactors.
China is stepping up its capital investment profile and is making available $3.56B in a credit line to the Ukraine to support this development effort. The timing for these projects is yet to be determined, but expect a lengthy discussion around this opportunity when the Ukrainian Prime Minister meets with Chinese government officials this November.