Workers help install a crane tower for the coal-to-liquids project at Shenhua Ningxia Coal Industry Group in Yinchuan, the Ningxia Hui autonomous region.
Coal-to-liquids venture is biggest of its kind in the world
With annual output capacity of more than 4 million metric tons of oil, the largest coal-to-liquids project in the world delivered its first shipment of products on Wednesday in Yinchuan, the Ningxia Hui autonomous region.
The project is the result of 39 months' construction and investment of 44 billion yuan (.3 billion) and the total investment is estimated at 55 billion yuan, according to its developer, Shenhua Ningxia Coal Industry Group, a subsidiary of energy giant Shenhua Group Corp.
Although the productivity is small compared with China's nationwide oil demand－expected at 610 million tons a year by 2020－industry insiders said the project was a milestone in the nation's energy security efforts and the process of economic restructuring in Ningxia.
"The completion of the project is a substantive achievement for China in optimizing its strategic energy reserves," said Shenhua Chairman Zhang Yuzhuo.
"It also means that China's abilities at equipment manufacturing and integration have reached a higher level."
China's fuel resources have featured abundant coal but inadequate supplies of oil and gas, with more than 60 percent of its crude needs depending on imports in 2015.
Zuo Qianming, chief coal analyst with Cinda Securities Co, said that coal-to-liquids technology had more significance for China's national energy security than for generating profits.
"If the international oil price shoots up, China will have a backup for its oil demand," Zuo said.
The project uses a liquefaction process that involves gasification of the coal to a mixture of carbon monoxide and hydrogen, and then converts the syngas mixture into liquid hydrocarbons.
It will consume about 20 million tons of coal annually and produce 2.73 million tons of diesel, nearly 1 million tons of naphtha and 340,000 tons of liquefied petroleum gas.
"Our technologies are leading the world in many ways, enabling us to build large-scale projects," said Yao Min, deputy general manager of Shenhua Ningxia. "The domestically developed technologies and equipment will help to cut costs and increase profit."