Shenhua Ningxia Coal Industry Group Co Ltd (Shenning Group) will be seeking Rmb10bn-plus (US$1.5bn-plus) in loans for a coal-to-oil production project, banking sources said.

Sources said the financings will likely be syndicated considering the large amount involved and that major Chinese banks, including the "big four" -- Agricultural Bank of China , Bank of China , China Construction Bank and Industrial & Commercial Bank of China -- will be involved in the financing.

One of the "big four" banks is likely to get the mandate as the financier is Shenning Group's closest relationship bank in Ningxia province where the company is located, sources said.

The project needs total investment of Rmb58.1bn (US$9.1bn), according to the website of China's Ministry of Environmental Protection (MEP).

One source said up to 30% of the total investment could be raised via bank loans. However, the source said the debt raising is unlikely to be done in one go as the project will be constructed in several phase, taking years to complete.

Another source said the project will get approval from the National Development & Reform Commission (NDRC) before mid-September.

The group has not informed banks of any detail on its financing plan yet, according to sources.

The MEP document showed, the coal-to-oil project will use coal liquefaction technology to produce diesel, naphtha, liquefied petroleum gas (LPG) and sulfur, with 11 production plants and affiliated facilities to be constructed. Total annual output of all the oil-related products amounts to 4m tonnes, according to the document.

According to local media, Shenning Group has recently changed its partner on the project from Sasol Synfuels International to the Institute of Coal Chemistry of Chinese Academy of Sciences. However the MEP document, dated March 7, 2011, still maintained the project would be jointly developed by Shenning Group and Sasol, using technologies from Sasol.

Shenning Group is jointly owned by China's largest coal company Shenhua Group Corp Ltd (51%) and the Ningxia provincial government (49%). It was established in 2006 with initial capital of Rmb10.1bn.

According to its website, the group has 44 secondary production and operation units and operates in sectors such as coal mining and washing, coal deep processing, coal chemical industry, power generation and real estate.

Attempts to reach Shenning group and its parent Shenhua Group were not successful.

State-owned Shenhua Group has just sealed a Rmb25.8bn five-year loan on August 7 for its acquisition of State Grid Energy Development Co Ltd, the largest syndicated loan so far this year according to Thomson Reuters LPC data.

The deal led by Agricultural Bank of China, China Construction Bank and Industrial & Commercial Bank of China paid a margin of 90% of the PBOC rate.