OREANDA-NEWS.  September 11, 2012. China Shenhua Co announced that its coal-to-liquid oil station set in Erdos city will start business in a few days.

According to its management, the company will expand its business in Inner Mongolia and neighboring provinces.

The company started the globally first megaton scale coal-to-liquid project in Erdos city, investing 12.6 billion yuan and planned to produce diesel,naphtha and liquefied petroleum gas.

According to the company's report, it gained profits of more than 400 million yuan in 2011 one year after it started commercialization, and gained 270 million yuan in Q1 this year by selling diesel, naphtha and liquefied petroleum gas.

And now the management is considering to inject the projects into assets of the listed company. While other two direct liquefaction lines may be added, thus reaching a annual target of 3.2 million tons oil. The two lines are now in the application to NDRC.

According to the company,the State Council has approved its scheme to build a total production capacity of 5 million tons of oil.

But cost is not low, according to Zhou Feng, an energy expert, one ton of coal transferred oil consumes 4 tons of coal. Adding other fees, if coal price is 100 yuan per ton, cost of one ton of oil would reach 1000 yuan per ton.

According to report of the company, cost of oil production was 1200 yuan per ton when coal price was 90 yuan per ton, and interim report in this year shows that the cost of the company's self-produced coal is 149.9 yuan per ton. Coal cost increased by 40 percent in 6 years. And a megaton projects require at least 10 billion yuan investment.

According to Zhou,future of coal-to-liquid oil industry is still in shadow when both price of oil and coal are fluctuated.

But China has enacted and will start bids for coal-to-chemicals projects this month, and coal-to-liquid projects has a planned production capacity of more than 20 million tons.