Shenhua Group Starts China's First Coal-to-Fuel Plant

By Wang Ying

Jan. 6 (Bloomberg) -- Shenhua Group Corp., China's biggest coal producer, began operating the nation's first plant to turn coal into fuels to boost output of gasoline and diesel.

The Beijing-based parent of China Shenhua Energy Co. started the plant in Inner Mongolia on Dec. 30, it said in a statement posted on its Web site late yesterday. The plant is able to produce 1 million metric tons of fuels a year, research director Shu Geping said in June 2007.

Shenhua Group is the only domestic company authorized to develop coal-to-fuels plants in China after the government limited such projects in August to conserve coal resources, the Ningxia Provincial Development and Reform Commission said in August. Sasol Ltd., the world's biggest converter of coal into motor fuels, halted plans for a project in China's Shaanxi province after the ruling.

Shenhua Group will try to keep ``stable operations'' at its first coal-to-fuels plant, it said yesterday. The plant used Shenhua Group's own so-called Direct Coal Liquefaction Technology, it said.

State-run China Daily reported last month, citing Ning Chenghao, a company researcher, that Shenhua Group may delay operations of the Inner Mongolia plant until early 2009.

China is the world's biggest producer and consumer of coal. The nation's demand for motor fuels is rising as car sales climb. While 2008 car sales growth slowed, China will remain the world's fastest-expanding major vehicle market in the next decade, Kevin Wale, General Motors Corp. China President Kevin Wale said in a statement earlier today.

Sasol said in August it will continue studying the viability of joint venture plant with Shenhua Group in Ningxia province.

To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net.