Xinao CTC

completed

The project sponsor, which is the Xinao Group (Xinao or the sponsor), has requested IFC financing for the construction and operation of greenfield petrochemical facilities with a total production capacity of 600,000 tons per annum (tpa) of methanol and 400,000 tpa of dimethyl ether (DME) using coal as a raw material. The project’s construction period is estimated to be thirty months, with physical completion expected in 2009.China has historically relied on coal and, more recently, petroleum for its energy needs. In 2002, these sources made up 62% and 28%, respectively, of its total energy consumption. This heavy utilization of highly polluting coal energy has imposed significant environmental costs on the country. In addition, increasing consumption of imported petroleum is raising concerns about China’s energy security. In order to address these environmental and energy security concerns, the Chinese government has initiated an energy diversification policy centered on the use of clean-burning fuels.The sponsor’s Xinao Gas subsidiary is a leading piped gas distribution company in China. In a drive to increase the Xinao Group’s profitability and diversify its fuel sources, the project is aimed at backwards integration into fuel generation and supply by creating a captive, lower cost supply of fuel products suitable for the Chinese retail and household market. The project will utilize China’s abundant and relatively low-cost coal reserves, located at one of the poorest and most underdeveloped provinces in China, to produce methanol and DME, which are environmentally friendly fuels that also have value as raw materials for downstream applications. Although the project envisages selling only DME, with methanol only as an intermediate product, the project will have the flexibility to sell methanol if needed or if opportunities are sufficiently attractive.