Beijing and London - China, the top coal producer and consumer, is encouraging coal-to-liquid (CTL) projects to reduce the country's dependence on imported oil.

Beijing raised the capital threshold for such projects last July to prevent the industry overheating.

CTL relies on an easily available raw material, and the rising cost of scarcer crude oil is making it commercially viable.

South Africa's Sasol is the only commercial producer of motor fuel from coal but China is likely to have a CTL plant running late this year.

The Fischer-Tropsch process used by Sasol converts coal to gas, which then reacts over a catalyst to make liquid fuels. Coal can also be liquefied directly, which can be more energy efficient, but this technique is commercially untested.

Although potentially more polluting than alternatives, advocates of coal-derived fuels say they can be clean, provided that carbon capture and storage technology is used to bury emissions from the process.

Some say they could be cleaner than conventional fuels, while the International Energy Agency (IEA) said they were roughly as clean if carbon was stored at the site.

For China, carbon capture is not a priority, but the IEA said there was a willingness to use it if the economic cost could be covered.

The main projects being developed in China are:

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  A direct coal liquefaction demonstration plant in Inner Mongolia.

Shenhua Group is building the plant to convert coal using direct coal liquefaction technology it has developed. The project is expected to produce 1 million tons of liquid petroleum gas, naphtha, diesel and phenol a year, ramping up to 5 million tons in the second phase. The project is set to start next year.

¡¤  A CTL plant at Yulin in Shaanxi.

Shenhua Group and Sasol are looking to build a plant using Sasol's low-temperature Fischer-Tropsch process. The estimated cost is $5 billion (R35.55 billion) and the plant could produce 6 million tons of liquid fuel a year. A feasibility study is under way with a target start date of 2012.

¡¤  A CTL plant in the Ningxia region of northern China.

Shenhua Ningxia Coal Industry, a unit of Shenhua, and Sasol will develop a $5 billion Fischer-Tropsch plant to produce 3 million tons a year (80 000 barrels per day) of liquid fuels. A feasibility study is under way, with a start date of 2012.

¡¤  A CTL plant in Ningxia.

Royal Dutch Shell agreed with Shenhua Ningxia Coal Industry last year to build a $6 billion plant using Shell's coal gasification technology to produce 70 000 barrels a day of oil and chemical products. The plant should start in 2012.

¡¤  A demonstration CTL plant in the Yulin area of Shaanxi.

Yankuang Group is building a 100 billion yuan (R93 million) plant to demonstrate its indirect CTL technology. It will produce 1 million tons a year of diesel, naphtha, petroleum gas and special wax from 2012.

¡¤  A CTL plant at Tunliu.

Coal producer Lu'an Group is building a plant to produce 160 000 tons a year of oil products and chemicals from 2008.

¡¤  An Inner Mongolia CTL plant.

Yitai Group expects to produce 160 000 tons a year from next year.

Other coal transforming projects include:

¡¤  A coal-to-gas, power and chemicals plant in Shaanxi.

Xiwan, a venture between Anglo American and Shaanxi Coalfields, is conducting a feasibility study on a $4 billion plant to produce gas, electricity and chemicals from 2009.