14 January 2014

PARIS, Jan 14 (Reuters) - French oil major Total has received approval from Chinese authorities to invest in a $4 billion project to turn coal into petrochemical products in the northern province of Inner Mongolia, Total said on Tuesday.

Total will cooperate with China Power Investment Corporation (CPI), one of the country's top five utilities, to adapt a so-called "coal-to-olefins" technology it is already testing at a pilot plant in Belgium.

The plant would turn abundant Chinese coal output into gas, before turning that into olefins and polymers -- small particles used to make plastics -- with the advantage of cutting reliance on imported oil which is the raw material for such products.

Total has received the authorisation from China's NDRC authority, and the group is now entering an in-depth study phase, with a start-up date seen after 2017, a spokeswoman for Total said.

"The goal is to get a foot in a growing market," she told Reuters.

The plant would have a production capacity of 800,000 tonnes per year of polyethylene -- the most common plastic, used in plastic bags and bottles -- and polypropylene, used in automotive components and textiles.

The go-ahead comes as France and China prepare for a series of celebrations in 2014 to mark the 50th anniversary of former president Charles de Gaulle's official recognition of the Communist regime in Beijing.

French ministers have expressed hopes the anniversary, to culminate with President Xi Jinping's state visit to France in the spring, would boost trade relations between the two countries.

Total had been in talks for more than three years on the project, since a letter of understanding was signed between Total and CPI in November 2010 in Paris.

Chinese coal production of 3.66 billion tonnes at the end of 2012 accounted for nearly half the global total, according to official data. The figure dwarves production rates of just over 1 billion tonnes each in Europe and the United States.

Much of China's new capacity is in regions like Inner Mongolia and Shaanxi, reflecting a strategy to close small mines in marginal locations and consolidate output in a series of huge "coal industry bases".

A joint venture between the two companies has not been created at this stage, the spokeswoman said. (Reporting by Michel Rose; editing by Muriel Boselli and Keiron Henderson)

by Michel Rose
January 14, 2014