China has had an abundant stock of coal, and chemical giant Hengli has pledged US $ 20 billion to convert coal into polyester yarn that can be used to make clothes, packaging and plastic bottles.
The first-of-its-kind project in China’s coal-to-chemical sector comes after Hengli had borrowed heavily to set up an oil refinery to use crude oil to make polyester yarn.
As the world is battling to reduce the dependence on fossil fuels, the environmental impact of using coal, which is a huge source for greenhouse gases, for such a project could be severely detrimental.
However, the growing sector has already had investments amounting to US $ 85 billion and is in line with Beijing’s commitment to coal. This move will put Hengli on the list with other Chinese companies like coal miner Shenhua Group which have embraced the coal-to-chemicals sector.
Hengli is already one of the world’s largest producers of polyester yarn and is likely to easily get regulatory approvals for the project which it intends to have running by 2025 in Shaanxi province of China.
A spokesperson from Hengli stated that the project was about diversification from oil, full integration and economies of scale not politics. However, Global rivals Dow Chemicals, Saudi Basic Industries (SABIC) and Total faced lengthy regulatory processes when they planned to set up similar ventures in the country.
The environmental impact of such a project could have catastrophic ramifications as coal-based plants emit three times more carbon dioxide and water waste per unit of production compared to oil based ones.
The scale of the Yulin project also means it could consume 60 million tonnes of fresh water every year.