Domestic coal mining giant Shenhua Group and US-based Dow Chemical Company have signed a cooperation agreement and announced plans for a feasibility study, bringing the two a step closer to building a world-class coal-to-chemicals complex in Northwest China's Shaanxi Province.

The project will use "clean coal" technologies that convert coal to methanol to produce ethylene and propylene, the building blocks of various plastics and chemical products.

The complex will include a chlor-alkali unit, enabling the production of caustic soda, vinyl chloride monomer and chlorinated organics. Other derivatives planned for the complex include glycols, amines, solvents, surfactants, acrylic acid and propylene derivatives.

The feasibility study will encompass environmental impact assessment, water supply, front-end loading engineering design, market and product mix, logistics and supply chain, and economic evaluation.

The study is expected to take approximately two years. The two companies will then compile a project application report and submit it for government approval.

"We are delighted to see the project moving to the next phase with Shenhua," said Andrew Liveris, chairman and CEO of Dow. "This project aligns with Dow's strategy to invest in growth geographies like China, and will build Dow's competitive position to serve customers in Asia with locally produced products and solutions."

Chen Biting, chairman of Shenhua Group, said producing oil substitutes converted from coal is of great significance to China and the world. "The coal chemical plant will make full use of the advantages of the two companies. This project will form a commercially competitive industry, with a positive impact on the local economic growth."

Dow officials promised that workers and communities in Shaanxi will benefit from a safe, high-standard production facility as Dow will bring its advanced know-how in environmental protection, worker safety and energy efficiency to the joint venture.

The success of this project will provide China a new and viable way to produce chemical products from its indigenous coal and salt resources, helping it to reduce its reliance on oil imports and maintain sustainable growth, said Liveris.