The expected deal, part of SEC's effort to supply other equipment to the project, will help strengthen Shanghai's position in the domestic machinery manufacturing industry, said Xu Yudong, SEC chief economic manager.

"We are confident in winning the 60 million yuan (US$7.25 million) contract," Xu said. The deal involves the supply of a hydrogen-adding reactor, a key part in the coal liquefaction equipment that helps transform coal into oil products.

Beijing-based Shenhua Group Corp, which launched the project late last year with a total expected investment of about 35 billion yuan (US$4.23 billion), is to announce the winner of the bid within two weeks, according to Xu.

SEC's major rivals include the China First Heavy Industries Corp (CFHI), based in Northeast China's Heilongjiang Province, Kobe Steel of Japan as well as an Italian company, sources said.

The reactor is the third of its kind from the project's first production line, which is being built at Shenhua's coal field in North China's Inner Mongolia Autonomous Region. CFHI has won the supply deal for the first two such reactors.

The project, which is scheduled to be completed by 2008, will be composed of six production lines, with a total annual output capacity of 5 million tons of oil products, including diesel, gasoline and naphtha.

The value on the equipment supply deals for the project's first production line totals 4 billion yuan (US$484 million), although some of this will have to be imported, Xu said.

(China Daily June 26, 2003)