North Korea Turns Coal Into Gas to Weather Sanctions
North Korea Turns Coal Into Gas to Weather Sanctions
BEIJING—North Korea has accelerated a little-known program to use its abundant coal supply to produce synthetic gas, helping the isolated nation reduce its dependence on foreign oil and withstand sanctions aimed at curbing its nuclear program.
Pyongyang is relying on coal gasification to buttress its economy against United Nations curbs on its petroleum imports, according to foreign officials and experts. It has ramped up its use of the technology in recent years, installing it in some of its biggest fertilizer, steel and cement plants that previously relied on imported oil for power or raw materials, these people said.
Coal gasification may have freed supplies of imported fuel for the North Korean military, among other uses, experts said.
A fresh drive since 2016 to generate chemical products from coal was also designed “to allow them to face down sanctions—in perpetuity if necessary,” said Peter Ward, who studies North Korea’s economy at Seoul National University.
Growing Need
North Korean imports of refined oil, fertilizers and organic chemicals—many of which can be made through coal gasification—were declining even before the latest U.N. sanctions.
China, North Korea’s longtime ally, has provided technology and expertise for the coal-conversion efforts, according to Chinese companies. One said in July that it is supplying a large coal gasifier designed to produce 40,000 cubic meters an hour of synthetic gas to an industrial zone north of Pyongyang.
That output alone would be enough to produce synthetic fuels equivalent to about 10% of North Korea’s annual imports of crude and refined oil in recent years, according to David Von Hippel, an expert on North Korea’s energy sector at the Nautilus Institute.
China’s commerce ministry said that Beijing enforces all U.N. sanctions on North Korea.
Pyongyang has developed other ways to survive sanctions, notably ship-to-ship oil transfers to import fuel, and cyber theft. Reforms allowing the opening of private markets have made the economy more resilient.
Spare Resources
North Korea's coal exports fell after a U.N. ban in 2017, leaving more for domestic use.
It is difficult to quantify the technology’s impact for North Korea because of Pyongyang’s secrecy. The country still faces chronic energy shortages and needs oil for many sectors, including shipping, and would need many more gasification plants to compensate for the latest sanctions, which capped its imports of crude and cut its refined petroleum allowance by 75%.
But the technology, invented in the late 18th century, has sustained other coal-rich but petroleum-poor countries facing economic isolation. Nazi Germany used coal gasification to mass-produce enough synthetic fuels to power tanks and aircraft in World War II. Similar technology helped apartheid-era South Africa withstand a 1980s oil embargo.
Gasification, combined with smuggling and other strategies, could also buy the North Korean regime some time, experts said.
In North Korea’s underdeveloped economy, “to power even parts of that with gasified coal” could have significant impact, said Benjamin Katzeff Silberstein, co-editor of the North Korean Economy Watch website. “I think they can muddle along for at least maybe two or three years in the current situation.”
The U.S. is hoping that sanctions will persuade North Korean leader Kim Jong Un to reach a deal ending his nuclear program in exchange for economic support. But negotiations have moved slowly, and Pyongyang is meanwhile forging closer ties with South Korea and trying to get sanctions eased before it takes meaningful steps to disarm.
Satellite images show part of the Namhung Youth Chemical Complex, north of Pyongyang, in 2005 (above), before the construction of a coal gasification plant, and in 2013 (below), after the plant was built as part of North Korea’s push to use convert coal for multiple uses.
Photo:
DigitalGlobe/Getty Images
Photo:
DigitalGlobe/Getty Images
Sanctions appeared to be biting early this year, as prices for many imported goods rose and electricity shortages emerged, according to regular visitors to North Korea. South Korea’s central bank estimates the North’s economy shrank 3.5% last year.
In recent months, though, prices and power supplies have stabilized and North Korea appears to have maintained substantial levels of agricultural, industrial and construction activity, visitors said.
North Korea has estimated coal reserves of 14.7 billion tons—more than Kentucky. Much of its coal production has been exported, but an export ban last year left a surplus for domestic use.
Counting Costs
Prices of some goods spiked last winter in North Korea because of sanctions but have since stabilized.
Food
North Korean won per kilogram
Fuel
North Korean won per kilogram
New sanctions in 2017 “reinforced and probably accelerated their efforts” at coal gasification, said Bradley Babson, an expert on North Korea’s economy at Bowdoin College.
Coal gasification is neither new nor complex: It involves heating coal, usually under pressure, with oxygen and water so it breaks into chemical components that form a “syngas.”
The technology isn’t more widely adopted in large part because it is costlier than using petroleum.
It has become cheaper in recent years—in part because of Chinese development of the technology—and remains viable for countries with abundant coal and few alternatives.
North Korea obtained German coal-gasification technology from the Soviets around the 1960s but did little to develop it, and became dependent on subsidized crude from Russia and China.
In 2006, the year of Pyongyang’s first nuclear test, then-leader Kim Jong Il began a successful five-year drive to build coal gasification facilities in two of the country’s biggest fertilizer plants, according to North Korean official media.
After Kim Jong Un took power in 2011 and placed greater emphasis on economic development, he broadened those efforts, completing gasification facilities at the country’s biggest iron and steel plants, North Korean media reports show.
Defying tight sanctions, vessels linked to Pyongyang use a large toolbox of tactics to import and export goods like oil and coal—and keep North Korea’s economy afloat. Illustration: Crystal Tai
Since 2016, as North Korea accelerated missile and nuclear weapons tests, Mr. Kim has also overseen a drive to build a new industry designed to convert coal into precursor chemicals such as methanol that can be used in products including synthetic fuel, plastics and solvents.
The country’s official media often exaggerates industrial progress, but experts say the gasification reports, often accompanied by video and still images, appear genuine, and some are corroborated by satellite imagery.
Crucially, coal gasification has helped provide raw materials to increase output of fertilizer and plastic sheeting for greenhouses, boosting food production, and enabled other industries to develop products such as steel alloys and pipes, experts said.
The technology is also now used in small-scale power plants to boost electricity supplies, according to footage broadcast by North Korean state television in November.
One Chinese company, Hebei Kaiyue Group, said on its website that seven officials from North Korea’s Academy of Sciences visited one of its facilities in June to study how it converts coal to methanol, ammonia and dimethyl ether, which can be used as a diesel alternative.
Workers at the Namhung Youth Chemical Complex, in Anju, North Korea, in 2016.
Photo:
Kim Kwang Hyon/Associated Press
“The North Korean delegation gained an in-depth understanding of the coal gasification unit,” it said, adding that Kaiyue would help with work on a North Korean project to generate chemicals from coal.
A Kaiyue official confirmed the visit, but declined to comment further.
The large gasifier slated for the industrial zone north of Pyongyang was built by Yangmei Chemical Industry Machinery Co. Ltd, a subsidiary of one of China’s biggest coal companies; it has been completed but not yet transported to North Korea, as the Chinese awaited North Korean instructions, according to two people involved. The company declined to comment.
Another company, the Liaoning Ende Engineering Construction Co. Ltd., has produced coal gasifiers in China for several years in a joint venture with a North Korean entity, although it changed its status last year so it is now wholly Chinese-owned.
A Liaoning Ende representative said North Koreans were still working there, but that the company doesn’t export its products.
Russia’s St. Petersburg Electrotechnical Company reported supplying North Korea in 2017 with equipment to produce diesel through coal liquefaction, a similar process that converts coal to liquid fuel. The company didn’t respond to a request for comment.
—Kersten Zhang in Beijing contributed to this article.
Write to Jeremy Page at jeremy.page@wsj.com
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