US industrial gases group Air Products has signed an agreement with Lu’An Clean Energy, part of Chinese coal mining conglomerate Lu’An Mining, to form a $1.3 billion joint venture for a syngas-to-liquids complex at Changzhi City in Shanxi province.

Air Products will contribute four air separation units (ASUs) that it previously constructed to supply the site as well as $500 million in cash for a majority 60% stake in the new company, which will be called Air Products Lu’An (Changzhi) Co. The industrial gases group has already invested $300 million to build, own and operate the ASUs.

Lu’An, which will contribute the gasification and syngas purification system, will receive $500 million and take a 40% share in the venture.

Under terms of the deal, Lu’An will supply coal, steam and power to the jv, which in turn will provide syngas under a long-term, onsite contract to Lu’An Mining for the production of a reported 1.8 million t/y of liquid fuels (mainly diesel) and chemicals.

Air Products’ chairman, president and CEO, Seifi Ghasemi, said the venture is “perfectly in line with our stated strategy of deploying our significant cash to grow by acquiring existing assets and expanding our scope of supply to include syngas.”

Li Jinping, chairman of Lu’An, added: “Extending our strong partnership/relationship with Air Products through this new joint venture enables us to take advantage of world-leading project management and operational expertise to deliver syngas for this landmark energy project.”

The transaction is expected to close as soon as possible, pending government and regulatory approvals and initial operational start-up. Financial details were not disclosed.