TIANJIN, China, Sept 8 State-owned China Shenhua
Group made a profit from its pioneering direct coal-to-liquids
(CTL) project in the first half of this year, raising hopes that
the world's second largest oil consuming nation may expand
forays into alternative fuel production.
China has rich coal reserves but limited oil deposits. After
backing CTL as a way of improving energy security and easing its
growing dependence on overseas crude oil, China went cold on the
technology in 2008, cancelling dozens of projects amid concerns
about high production costs and the impact it would have on
scarce water supplies.
The parent of China Shenhua Energy Co ,
the country's biggest coal producer, produced 470,000 tonnes of
oil products from coal in the first half and costs of the fuel
were equivalent to crude oil prices of less than $60 a barrel,
according to Shenhua Group's General Manager Zhang Yuzhuo.
Benchmark Brent crude prices LCOc1 have mostly hovered
above $100 a barrel since February.
The CTL demonstration project, with designed fuel production
capacity of 1.08 million tonnes per year, has been in continuous
and stable operations since November last year, Zhang said in a
speech prepared for the China Petroleum and Chemical
He said Shenhua reaped 800 million yuan ($125.1 million) in
earnings before taxes on the direct CTL project in Erdos, Inner
Mongolia, in the first six months.
Zhang said Shenhua planned to raise fuel production capacity
in Erdos to 3 million tonnes a year by adding another direct CTL
line in the first phase and to 5 million tonnes a year after a
second phase is completed. He did not specify a timeframe or the
Shenhua also plans to start constructing a 56.5 billion
yuan, 3 million tonne per year direct CTL project in
northwestern Xinjiang later this year.
In March, China granted initial environmental approval to an
$8.8 billion indirect CTL project in northern Ningxia region by
South African petrochemical firm Sasol and Shenhua
Group to make 3.16 million tonnes of diesel and 655,500 tonnes
of naphtha a year.
Shenhua aimed to produce 3 million tonnes of oil products, 5
million tonnes of chemical products, and 1.8 billion cubic
meters of natural gas in 2015 from its coal-to-liquids,
coal-to-gas and coal-to-olefin projects, Zhang said in April.
Shenhua also planned to boost production of oil products to
11 million tonnes, chemical products to 10 million tonnes and
natural gas to 18.3 billion cubic meters in 2020.
($1 = 6.394 yuan)
(Reporting by Jim Bai and Chen Aizhu; Editing by Jonathan