Coal Liquefaction Projects Abound in China on Speculation of Favorable Government Policies

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Researched by Industrial Info Resources (Sugar Land, Texas)--Several coal liquefaction projects are set to start in China this year as companies speculate that the Chinese government will adopt policies to encourage the development of such projects and coal-chemical businesses to ensure energy security.

The Shenhua Group has a coal liquefaction project in Ordos City, Inner Mongolia Autonomous Region that came on stream on December 31, 2008. The project is expected to produce 1 million tons of oil per year from solid coal. The company is also building a 160,000-ton-per-year coal liquefaction project that is expected to come on stream in the first half of 2009.

In August, 2008, the government had halted all coal liquefaction projects under construction, sparing only two as pilot projects -- both of which were projects by Shenhua. One was the direct coal liquefaction project in Ordos, and the other, which was carried out in cooperation with South African coal liquefaction giant Sasol (NYSE:SSL) (Johannesburg), was an indirect coal liquefaction project. The latter is expected to come on stream by the end of 2009.

Apart from the two projects, five other projects are expected to come on stream this year. The Lu'an Group, one of five major coal companies in central China's Shanxi province, is planning a 160,000-ton-per-year coal liquefaction project to come on stream in the first half of 2009. Shanxi is considered to be China's hotbed for coal production.

The Inner Mongolia Yitai Coal Company Limited (SHA900948) (Ordos), one of China's top 500 companies, has had 13 coal production bases designated by the State Council. The company has a production target of 50 million tons of coal by 2010 to become one of the country's top 10 coal producers. Yitai Coal also has a 160,000-ton-per-year project that is expected to come on stream in the first half of 2009.

The Yankuang Group, a coal giant in eastern China's Shandong province, owns two coal mines that have a combined coal reserve of 3.7 billion tons. The company has a 1 million-ton-per-year coal liquefaction project under construction in western China's Shaanxi province.

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