UPDATE 1-China's Datang plans $2.7 bln coal gasification plant

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SHANGHAI, April 14 (Reuters) - Datang International Power Generation Co Ltd (0991.HK: Quote, Profile, Research, Stock Buzz) (601991.SS: Quote, Profile, Research, Stock Buzz), China's second-largest listed electricity firm, said on Monday it plans to set up an 18.78 billion yuan ($2.68 billion) coal gasification project.

The joint venture in northern Inner Mongolia region, with three other partners, will produce gas to supply Beijing, Datang said in a statement late on Friday.

Due for completion by 2012, it is part of a national clean-energy drive and will use coal from nearby Shengli to produce 4 billion cubic metres of gas and other by-products annually.

Coal gasification technology uses heat and pressure to convert coal or any carbon material into a synthetic gas. It allows for the separation of pollutants such as nitrogen oxide, sulphur dioxide and mercury.

China, battling serious pollution problems, is keen to boost the use of clean burning gas but is reluctant to commit to long-term deals as international prices soar.

Although turning coal into gas is energy and water intensive, it allows the country to curb its reliance on imports and turn instead to its plentiful domestic deposits of the black fuel.

Datang will provide 51 percent of the 100 million yuan in initial registered capital of the venture, Keqi Coal-based Gas Co.

Beijing Gas Group, a subsidiary of Beijing Enterprises Holdings Ltd (0392.HK: Quote, Profile, Research, Stock Buzz), will provide 33 percent, China's state-owned CDC, Datang's largest shareholder, will provide 6 percent and Hong Kong fund company New Horizon Capital will provide 10 percent. ($1=7.006 Yuan) (Reporting by Edmund Klamann and Emma Graham-Harrison; Editing by Ken Wills)