China's Shenhua Group Investing $8 Billion in Xinjiang Coal Projects

Shenhua Group Corp Ltd., China's biggest coal producer, will invest $8 billion in coal-to-oil conversion projects in the country’s western Xinjiang Uighur autonomous region.

According to Shenhua Group Corp Ltd., within four years Shenhua will reach 70 million tons of annual coal production and build a coal-to-oil conversion plant with annual production capacity of 3 million tons, China Daily reported.

Shenhua Xinjiang Energy Co Ltd. vice-general manager Wang Ningbo said that the company is waiting for official governmental approval of the project, adding, "Hopefully, we will get the approval by the end of this year and the construction of the first 300 tons of coal-to-oil project will start in May 2012. We cannot start coal production in Heishan until we get the approval because it is a key coal supplier for the coal-to-oil projects in Xinjiang."

The investment is not without controversy, as Xinjaing is an arid region with limited water resources. China Center for Energy Economics Research at Xiamen University director Lin Boqiang observed, "The process of coal-to-oil conversion produces wastages in coal and water, which has a bad impact on the environment. There must be more economical ways to find a substitute for oil instead of coal-to-liquid fuel. The technology is not mature enough. The industry still lacks standards on quality and cost management."

By. Charles Kennedy, Deputy Editor OilPrice.com