China is the world's second-largest energy producer and fifth-largest crude oil producer. Driven by high oil prices and fast economic growth rates, China reached a record high in domestic oil production and consumption in the first half of 2006.

In the first six months, China's domestic production of crude oil totaled 92 million tons, up 2.1 percent year on year. Domestic production of processed oil reached 85 million tons, up 5.6 percent, according to China Petroleum and Chemical Industry Association statistics.

In that same period, China's net crude oil imports reached 70 million tons, up 17.6 percent and China's net import of processed oil reached 12 million tons, up 48 percent, according to customs figures.

China imported 47 percent of total oil consumption in the first half of this year, Commerce Ministry sources said.

"China will continue to rely mainly on domestic energy supplies and its oil production will stay anywhere between 180 and 200 million tons a year for a relatively long period of time," said Zhang Guobao, vice minister in charge of the NDRC.

The country will meet the energy challenge through stabilizing domestic oil output, looking for better energy alternatives and enhancing energy efficiency, according to a plan for the mid- and long-term development of the Chinese energy sector.

"The coal liquefaction project will offer an efficient way to quench China's thirst for energy. It is conducive to reducing China's external dependence on crude oil," said Professor Lin Boqiang of Xiamen University in East China's Fujian Province.

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China began developing coal-to-liquid fuel technologies in the 1980s. The coal liquefaction project was given strategic significance in the mid 1990s, as China became a net oil importer in 1993, according to Zhang Yuzhuo, deputy general manager of Shenhua Group, China's biggest coal producer.

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