China's top coal producer Shenhua Group Corp has started operations at the nation's first coal-to-liquids project in the northern Inner Mongolia Autonomous Region.

The Ordos-based plant became operational on December 30 and produced the first batch of oil and chemical products a day later, Beijing-based Shenhua said in a statement on its Website.

The project, which costs more than 10 billion yuan (US$1.5 billion) and is capable of producing 1 million tons of fuels a year, uses Shenhua's own direct coal liquefaction technology, the company said.

In a move to control risks in the experimental coal-to-liquids industry in China, the National Development and Reform Commission in August halted all coal liquefaction projects nationwide, except for Shenhua's Ordos project and another in Ningdong in Ningxia Hui Autonomous Region which is jointly planned by Shenhua and South Africa's Sasol Ltd.

But Sasol, the world's largest maker of motor fuels from coal, has halted another project with Shenhua in Shaanxi Province following the NDRC order.

The NDRC, China's top planning agency, said then that most domestic companies lack advanced technology, management experience and equipment for coal liquefaction, which consumes large quantities of water.

Making fuel from coal could be attractive when oil prices are high for China, which relies on imports for over half of its crude oil needs. But the plunge in crude prices in recent months has depressed the sector. China holds the world's third-largest proven coal reserves.

Elsewhere, BP Plc has appointed Chen Liming, former executive vice president for Sasol China, as its China president to replace Gary Dirks, a company source said yesterday.

(Shanghai Daily January 7, 2009)