Chinese energy company is to start business from its megaton facility.
China Shenhua Co. announced its coal-to-liquid oil station, situated in the town of Erdos, will begin business in a few days. The company, which started the world's first megaton scale coal-to-liquid project, hopes to expand its commercial operation throughout Inner Mongolia and other neighbouring provinces.
After a massive 12.6 billion yuan investment, the company has reported 2011 profits of 400 milion yuan and had already generated 270 million yuan of profit in the first quarter of 2012 through its sales of diesel, naphtha and liquefied petroleum gas.
The company's management is now considering reinvesting profits into a listed company, which will oversee two direct liquefaction lines, subject to approval from the National Development and Reform Commission (NDRC).
While profits continue to soar, so too do overheads. For each ton of coal liquified into oil, the plant uses four tons of coal, meaning even a small rise in the cost of materials could seriously affect the company's margins.
In a Shenhua report, the cost of oil production was 1200 yuan per ton, while coal was around 90 yuan per ton, compared to 149.9 yuan for self-produced coal.