China's coal-to-oil experiments are developing smoothly, according to officials.

China Shenhua's Coal-to-oil project progressing smoothly in accordance with the national requirements and is expected to produce oil in September, said Xue Jilian, the vice president of Shenhua Group Corporation.

Xue said the total investment of the project was over 10 billion yuan, and it was the key projects of the Chinese state, which owns the independent intellectual property rights.

The annual capacity of the project's first phase is 1 million tons, after completion the annual capacity will reach 3 million tons.

In accordance with the Shenhua's established objectives, the coal-to-oil project is expected to reach 5 million tons of production capacity until 2009, and gradually rise to 30 million every year.

At present the coal-oil project has certain advantages since the international oil prices are high. Though the projects received many objections in the beginning as people worried about plummeting oil prices, it seems now that situation is difficult to realize, an analyst of Changjiang Securities, one of the authority Securities companies said.

About four tons of coal can produce a ton of oil and compared with the international prices contrasts of coal and oil, the project has bright prospects, said Zhang Minglin, the Vice President of Yankuang Group.

The index futures price of crude oil briefly topped 103 US dollars a barrel on February 29 in New York, which is the latest high point of international oil prices.

This is regarded as the biggest driving force of coal-to-oil project. An analyst of Changjiang Securities said.