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| 2 Coal-to-oil Plants to Be Built at Cost of US$12b |
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State-owned Shenhua Group's Ningxia affiliate has teamed up with Royal Dutch Shell and South Africa-based Sasol to build two coal-to-liquids plants in the northwestern autonomous region with an investment of up to US$12 billion. The plants will help enhance energy security and enjoy good market prospects because of soaring oil prices, analysts said. Shenhua Ningxia Coal Industry Company, a subsidiary of the biggest coal company in The new plant, to be set up at the Ningdong coal production base, will cost US$5-6 billion, said Lim Haw Kuang, executive chairman of Shell Companies in The study is expected to be completed by 2009, and the plant will be able to yield 3 million tons of oil a year, or 70,000 barrels per day (bpd) by 2012, Shell said. The plant will use Shell's indirect coal liquefaction technology, which turns coal to gas and then liquefies it into fuels. The plants using the technology will break even if global oil prices hover at US$25-27 per barrel, said Qi Tongsheng, vice-governor of Ningxia Hui Autonomous Region. Analysts say global oil prices are unlikely to drop below US$40 per barrel in the near term. The agreement on the study followed a memorandum of understanding inked in February between Shell and Shenhua. Lim said the Chinese company would take a lion's share in the new venture, but Shell's stake was also "fairly big," without elaborating. Both sides have yet to decide how to retail their products but Yan Guohui, a senior engineer with Shenhua Ningxia, said one option would be to set up joint service stations with Shell or sell to the country's top two oil firms, Sinopec and PetroChina. "Talks haven't gone that far, and we will elaborate on the retailing details later," Lim told reporters yesterday at Another similar project is also being planned in Ningxia between Shenhua and Sasol, one of the global leaders in coal liquefaction technologies. Shenhua last month signed a cooperation agreement with Sasol to develop an 80,000 bpd coal-to-oil plant in Ningxia. "The two plants are almost the same in terms of technology, investment and timescale," said Wang Jian, president of Shenhua Ningxia. Qi said the Sasol plant might begin operation "months" after Shell, in 2012. While the two Ningxia plants adopt the overseas indirect technology, Shenhua will test its own direct technology which turns coal into oil products without the gasification process in the Inner Mongolia Autonomous Region. The plant, located at the A pioneer in developing the coal-to-oil business in (
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