Xinhua reported that Shell China Limited and China Shenhua Group, the nation's biggest coal producer agreed to conduct joint research and development on clean coal technology.

A MoU on cooperation was signed between Shell Limited and Shenhua Coal to Liquid and Chemical Co Ltd a subsidiary of the Shenhua Group. But a joint coal to liquid project of the two companies is being halted because of fluctuations in global crude oil prices.

Mr Shi Xiaoli Shell China director in charge of clean coal business said a feasibility study on the coal to liquid project had been conducted but it had been decided to halt it as global crude prices were currently at a relatively low level which would make profitability uncertain.

Mr Wu Xiuzhang Vice Chairman of Shenhua Coal to Liquid and Chemical Co said the profitability of such a project was highly dependent on market conditions, while quality of coal supplies and prices also impacted on the project. But Mr Wu said Shenhua own coal to liquid pilot project, initiated in Inner Mongolia at the beginning of the year would still be able to make a profit at current crude prices of between USD 65 and USD 70 per barrel.

Wednesday MoU did not specify any particular project the two sides would work on. It only said the two sides would seek more advanced technology to turn coal into gas and then to liquid and discuss possible applications of carbon capture and storage technology.

Three Chinese manufacturers have signed agreements with Shell to produce key equipment for the latter's coal to gas to liquid technology.