China's top coal producer Shenhua Group has joined hands with Sasol to set up two coal-to-liquids (CTL) plants in Northwest China, Shanghai Securities News reported Saturday.

Sasol, based in South Africa, is the world leader in producing fuel from coal. The multinational has produced more than 1.5 billion barrels of oil equivalent fuel in South Africa.

The two firms signed two agreements Thursday. One was to proceed the feasibility studies of an 80,000 barrels per day potential CTL project in Shaanxi Province. The other similar one is for a 80,000 barrels per day CTL project in the Ningxia Hui Autonomous Region.

The initial pre-feasibility studies of the two projects have confirmed that all key drivers are in place for establishing a viable CTL business in China using Sasol's unique Fischer-Tropsch technology, said the Xinhua newspaper.

Each plant is expected to cost more than 5 billion U.S. dollars. They could be brought into operation in 2012 if these CTL projects go ahead, the newspaper quoted Sasol Chief Executive Davies as saying.

Coal accounts for more than 84 percent of China's energy reserve. Experts said boosting CTL projects in China is the most practical way for the country to achieve self-support in oil supply.

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