China’s largest coal producer, the Shenhua Group, plans to invest Yuan 400 billion ($58.5 billion) in developing seven coal conversion centers in the country to produce oil products, natural gas, methanol and olefins, Chinese official news agency Xinhua reported Thursday.

     The centers will be located in the Inner Mongolia autonomous region and
Shanxi province in northern China, as well as Shaanxi province, Ningxia Hui
and Xinjiang Uygur autonomous regions in northwestern China, the report said
quoting vice president of project planning with Shenhua Coal Liquefaction
Corp. (Beijing), Zhang Diankui. He was speaking at an industry conference in
Inner Mongolia’s Hohhot city.

     By 2020, the Shenhua Group plans to produce 30 million mt of oil products
and chemicals annually through conversion of more than 100 million mt of coal,
Zhang said.

     Shenhua commenced operations end-2008 at its first coal-to-liquids
project in Inner Mongolia using self-developed direct coal liquefaction
technology. The 1 million mt/year (22,000 b/d) first phase of the Erdos CTL
plant in Inner Mongolia is capable of converting 3.45 mt of coal into 1.08 mt
of oil products. The plant’s output consists mostly of gasoil, and to a
smaller extent naphtha and LPG.

     Being the world’s largest coal producer, China started encouraging
development of CTL projects a few years ago in a bid to reduce the country’s
reliance on petroleum imports. However, the CTL technologies release carbon
dioxide into the atmosphere and consume huge amounts of water raising
environmental concerns.

     Work on most CTL projects in China was halted since September 2008 as the
central government asked local governments not to approve any new
coal-to-liquids projects, saying "coal liquefaction is a technology-, talent-
and capital-intensive project, and most domestic enterprises lack advanced
technologies, management experience and equipment."

     The only exceptions then were two involving the Shenhua Group: the Erdos
facility and the 80,000 b/d Ningdong coal liquefaction project jointly planned
by the group’s subsidiary Shenhua Ningxia Coal Group and South African
oil and gas major Sasol.
–Winnie Lee, winnie_lee@platts.com