Royal Dutch Shell yesterday said it had decided to postpone a coal-to-liquids (CTL) joint project with Shenhua Group in the Ningxia Hui autonomous region.

"In a period of economic downturn, we have postponed the project due to a number of reasons," Lim Haw Kuang, executive chairman of Shell Companies in China, told China Daily yesterday, without elaborating.

But the company will keep playing an active role in China's coal gasification sector, he added.

In 2006, Shell signed an agreement with Shenhua Ningxia Coal Industry Co, a subsidiary of China's largest coal producer Shenhua, to start feasibility study on a coal-to-liquids project.

The plant, which was expected to convert coal into oil products such as petroleum and diesel, was estimated to cost US$5-6 billion, according to Shell.

The project would have used Shell's indirect coal liquefaction technology, which turns coal first to gas and then liquefies it into fuels. It would have been able to yield 3 million tons of oil a year, said the company.

Besides this project, Shenhua had also signed an agreement with Sasol from South Africa to study a coal-to-liquids project in Ningxia.

Last year, Shenhua completed construction of a 10 billion yuan coal-to-oil project in Ordos in Inner Mongolia, which uses direct coal liquefaction technology.

China is a key part of Shell's long-term strategy to expand in faster-growing markets, company CEO Jeroen van der Veer said yesterday. The company, which is the second-largest non-government controlled oil company by market value, has been downsizing its refining and retail assets in Europe and Africa as demand falls in the regions.

The company is talking to possible Chinese partners about a joint bid to develop oil fields in Iraq, said the CEO.

However, he did not disclose the names of these Chinese companies, and which field they might bid for.

He said the deadline for the bidding is expected to be in late June or early July and the partnership details would be announced then.

Last year, China National Petroleum Corporation signed an agreement to jointly develop an oilfield in Iraq, which is among Iraq's first batch of joint-venture oil projects since the US-led invasion in 2003.

Under the agreement, China's largest oil company will help Iraqi partners develop the Al-Ahdab oilfield, 180 km southeast of Baghdad. The deal is worth US$2.9 billion.

(China Daily April 15, 2009)