VZCZCXRO7359
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2517 1070128
ZNR UUUUU ZZH
P 170128Z APR 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 6913
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAEPA/HQ EPA WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS BEIJING 002517 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ENRG KIRF CH
 
SUBJECT: STAFFDEL MIXTER'S VISIT TO INNER MONGOLIAN 
COAL LIQUEFACTION PLANT AND TIBETAN MONASTERY 
 
 
¶1. (SBU) Officials of China's Shenhua Company told 
Staffdel Mixter that their factory for direct coal 
liquefaction could begin producing diesel fuel from 
coal with minimal environmental impact by the end of 
this year.  During an April 6 tour of Shenhua's eighty 
percent-complete facility in Erdos, Inner Mongolia, 
project manager Peng Xiaochuan told the Staffdel that 
Shenhua's process, which was tested successfully in 
2006, will produce a product that is 10 percent LPG, 
25 percent naptha and 71 percent diesel fuel (although 
the fuel may require further refining before it can be 
used in vehicles).  Including the coal needed to run 
the factory, the process requires three tons of coal 
for every one ton of product produced, Peng said. 
 
¶2. (SBU) Press reports about Shenhua's especially 
clean direct liquefaction process attracted the 
Staffdel to want to tour the factory, according to 
delegation head Cobb Mixter.  Shenhua's Peng confirmed 
that the main emission from its process is carbon 
dioxide, which the company hopes to store in many of 
its nearby coal mines which are no longer in 
production.  The U.S. Department of Energy is helping 
Shenhua study the process of carbon sequestration, 
Peng noted. 
 
¶3. (SBU) In a separate meeting on April 9 in Beijing, 
BP-China Vice President Gary Dirks expressed 
skepticism that Shenhua's direct coal liquefaction 
process can work.  Dirks claimed the project faces 
technical problems and said cost overruns have nearly 
tripled the intended investment in the project 
facilities.  Shenhua's Peng noted that heavy 
investment from the company was required, but felt 
that the process would be profitable so long as the 
price of oil remained above USD38 per barrel. 
 
Largest Tibetan Temple in Inner Mongolia 
---------------------------------------- 
 
¶4. (SBU) A two-hour drive outside of Baotou, Inner 
Mongolia, the Staffdel on April 7 visited the 
Wudangzhao Temple, the largest Tibetan Buddhist Temple 
outside of traditional Tibet and the third-largest 
Tibetan Buddhist Temple in the world.  Monks told the 
Staffdel that the 250-year old temple now has fewer 
than 70 monks in residence, including a living Buddha 
who is a teenager.  Staffdel members observed and 
spoke with a number of teenage monks at the temple. 
Large portraits of the Dalai Lama were on display, 
along with a single small portrait of the Chinese- 
nominated Panchen Lama, which was pushed off to the 
side of an altar in the Temple's main hall. 
 
¶5. (U) This message is SENSITIVE BUT UNCLASSIFIED and 
should not be distributed outside the USG or posted on 
the Internet.  The Staffdel did not have the 
opportunity to clear this message. 
RANDT