Industrial giant Siemens signed an agreement with Shenhua Ningxia Coal Group (SNCG) yesterday to supply its advanced gasification equipment, a move that marks the German company's entry into China's coal gasification industry.

Under the agreement Siemens Power Generation (PG) group will sell key gasification equipment to SNCG for a coal-based dimethyl ether (DME) project, with a planned annual production of 830,000 tons.

Siemens PG also signed a memorandum of understanding to provide equipment for SNCG's coal-based propylene project that when completed will be one of the largest in the world.

"The move further strengthens our position in Chinese and worldwide gasification markets and the coal-to-chemical business," said Lutz Kahlbau, president of Siemens PG China.

It also marks a faster pace of development of SNCG's large-scale coal-to-chemical projects, he said. Kahlbau did not disclose the value of this contract.

Kahlbau said that the fuel gasification process Siemens uses, known as GSP, is one of the three most advanced technologies of its kind in the world. He added that its designs are efficient and more environmentally friendly than in the past.

In addition to a wide range of coal grades, the Siemens technology can also use biomass as well as petroleum coke and refinery residues as feedstocks.

Siemens is tapping into an enormous market for its technology. According to a draft plan for the development of China's coal chemical industry, the sector will see more than 1 trillion yuan invested by 2020.

As for SNCG, it now has five coal chemical projects under construction, representing a total investment of about 100 billion yuan.

According to Zhang Wenjiang, chairman of SNCG, the DME phase I project will produce 210,000 tons of DME and 600,000 tons methanol per year, refined from 1.87 million tons of coal. Investment cost is set at about 3 billion yuan.

The company plans later expansion to produce 830,000 tons of DME per year, which will mainly be used as auto fuel and an overall alternative to petroleum.

Zhang said SNCG's coal-based propylene project will require an investment of 13 billion yuan, with capacity projected at 520,000 tons of polypropylene per year and 220,000 tons of gasoline and liquefied fuel as by-products.

This project is not only the biggest project to date by SNCG, but one of the biggest coal-based propylene projects in the world.

"The cooperation of Siemens with SNCG is a significant milestone for Siemens China as well as Siemens global. We will work hard to look for other opportunities in China's booming energy market," said Richard Hausmann, president and CEO of Siemens China.

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