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September 10, 2009

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Home » Business » Energy

Deal inked on R&D in clean coal tech

SHELL (China) Ltd and China's Shenhua Group, the nation's biggest coal producer, yesterday agreed to conduct joint research and development on clean coal technology.

A memorandum of understanding on cooperation was signed between Shell (China) Ltd and Shenhua Coal to Liquid and Chemical Co Ltd, a subsidiary of the Shenhua Group.

But a joint coal-to-liquid project of the two companies is being halted because of fluctuations in global crude oil prices.

Shi Xiaoli, Shell China director in charge of clean coal business, said a feasibility study on the coal-to-liquid project had been conducted but it had been decided to halt it as global crude prices are now at a relatively low level, which makes profitability uncertain.

Wu Xiuzhang, vice chairman of Shenhua Coal to Liquid and Chemical Co, said the profitability of such a project was highly dependent on market conditions and that quality of coal supplies and prices also impacted on the project.

But Wu said Shenhua's own coal-to-liquid pilot project, initiated in Inner Mongolia at the beginning of the year, would still be able to make a profit at crude prices around US$70 per barrel.

Yesterday's MOU did not specify any particular project the two sides would work on. It only said the two sides would seek more advanced technology to turn coal into gas and then to liquid, and discuss possible applications of carbon capture and storage technology.

Three Chinese manufacturers have signed agreements with Shell to produce key equipment for the latter's coal-to-gas-to-liquid technology.

Shi said China is the largest market for Shell's liquefication technology, and such deals would lower its production costs.


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