China’s first coal-to-liquid plant is up and running, according to a new statement from its owner.

Shenhua Group’s Inner Mongolia plant apparently started turning coal into fuels and chemicals on December 30 (press release). Only South Africa also converts coal to oil.

Last year the Chinese government issued a moratorium on new coal to liquid facilities, but allowed the Shenhua Group to build its Inner Mongolia plant and continue a venture with South Africa’s Sasol company (Nature News). Bloomberg notes this and also says the second plant will likely open in 2013.

Researcher Ning Chenghao told the state news agency China Daily in December that a barrel of oil from the plant would cost about $45, although is could fluctuate due to coal prices.

Energy experts Platts say the plant currently produces around a million barrels of oil a year, with plans to ramp up to 20 million over 2012-2015 and 100 million by 2020.

The Wall Street Journal’s Environmental Capital blog notes:

While that’s still a literal drop in the bucket compared to China’s overall thirst for oil, it also shows that coal-to-liquids is slowly coming back into business. Falling oil prices and the credit crunch helped derail the first big coal-to-liquids plant in the U.S. in October. But in mid-December, West Virginia officials announced even bigger plans for a $3 billion coal-to-liquids facility.

China’s new plant also shows that countries rich in coal but poor in oil are likely to play to their strengths as they seek to meet rising demand for energy, especially liquid transport fuels.

In a feature on China and coal produced as part of Nature’s China special last year, Jeff Tollefson wrote:

… unless the carbon is actually captured at its source and sequestered in some form, even the newest and fanciest coal-based liquid fuels put roughly double the CO2 into the atmosphere compared with fuels derived from oil. China is under pressure to avoid doing exactly that, and the state-owned Shenhua Group is considering carbon capture and storage for the US$1.5-billion coal-to-liquids plant it expects to start up this year in Inner Mongolia. Shenhua is using its own technology to convert some 3.5 million tonnes of coal into diesel and other transportation fuels, equivalent to more than 24,000 barrels of oil per day. The plant will also recycle water and waste products, making it cleaner than older coal-to-liquids technologies, says Julio Friedmann, a researcher at Lawrence Livermore National Laboratory in Berkeley, California. “It’s an engineering marvel.”