BIZCHINA / Investment Alerts

Nation reins in fast growth of coal-to-liquid fuel projects
(Xinhua)
Updated: 2006-07-29 10:49

It is reported that a total of 30 coal liquefaction projects are under detailed planning or at the stage of feasibility study in the country. According to conservative estimates, the total capacity would exceed 16 million tons, and the involved investment would surpass 120 billion yuan (15 billion dollars). Insiders predict that China's annual oil output liquefied from coal will reach 50 million tons by 2020.

-- Enthusiastic foreign investors --

In addition to domestic coal giants, foreign businesses with coal-to-oil know-how are also attracted by the promising business opportunities.

Shell Gas and Power Developments BV and the Shenhua Ningxia Coal Industry Co. (Shenhua-Ningmei) signed an agreement on joint study of coal liquefaction technology on July 11 this year in Yinchuan, capital of Northwest China's Ningxia Hui Autonomous Region.

Under the accord, the Anglo-Dutch company will work together with Shenhua-Ningmei on the technological and commercial feasibility of launching an indirect coal liquefaction facility with a daily production capacity of 70,000 barrels of oil products and chemicals at the Ningdong coal production base.

"If the three-year feasibility program goes smoothly, the new coal-to-liquid fuel plant, with an investment of five to six billion U.S. dollars, will be one of the largest foreign-invested projects in the country," said Zhang Wenjiang, chairman of Shenhua-Ningmei.

As a leader in clean coal technology, "We have proven technology that converts coal to gas and then gas to liquids. We believe this technology is important to China, particularly in large coal-producing areas such as Ningxia," said Lim Haw Kuang, executive chairman of Shell China operations.

"Ningxia is not only rich in coal but in water and power supply, which are all important for the successful development of an indirect coal liquefaction project," said Zhang Wenjiang.

Aside from Shell, many other enthusiastic foreign businesses have come to China seeking opportunities with coal-to-liquid fuel projects.

In June 2006, South Africa-based Sasol, the world leader in producing fuel from coal, joined hands with Shenhua Group to set up two coal-to-liquids plants using Sasol's unique Fischer-Tropsch technology in Northwest China.

The two firms signed two agreements. One was to proceed on feasibility studies of an 80,000 barrel a day potential coal-to-liquid project in Shaanxi Province. The other similar is an 80,000 barrel a day coal-to-liquid project in the Ningxia Hui Autonomous Region.

"Each plant is expected to cost more than 5 billion U.S. dollars. They could be brought into operation in 2012 if these coal-to-liquid projects go ahead," said Sasol Chief Executive Davies.
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