China gas basins
 China.Pipelines  Chinas Petroleum Industry
 China news  PhilipYip  Ordos Basin Xian   China Pipelines
China gas a great leap forward  China Photos   China Offshore O&G 
Natural Gas Market: Foreign and Chinese Capitals Compete in China

January 3, 2003

Dept. of International Cooperation, CEInet

¡¡ Urban Fuel Gas: New Hot Spot of Foreign Investment  

    According to Catalogue of Guide for Foreign Invested Industries jointly released by State Development Planning Commission and other sectors in March 2002, in fuel gas and heating power industry, except major pipe network construction controlled by government and state-owned enterprises, gas resource, the other network construction of heating power resource will be opened to individuals, enterprises and foreign investors (but as for the construction, management of fuel gas pipe network in medium and large-sized cities should be controlled by Chinese side). Through the intensive market competition, the construction of urban fuel gas and heating power will be speeded up, so the enterprises in the field will be benefited, which will play a positive role in the development of Chinese natural gas industry.

    Due to the characteristics of the management of fuel gas pipelines, it is undoubtedly that the fuel gas in cities has huge market potential.

    Table 1 Current Natural Gas Transport Projects in China
    Project  Investor  Market  Progress  Note 
    West-to-east gas pipeline China National Petroleum Corporation. (CNPC) East China Officially starting China¡¯s huge energy project
    Coastal gas pipeline China National Offshore Oil Corporation (CNOOC) China¡¯s coastal region In plan Gas resource: Australia and Indonesia
    Pinghu gas field of China¡¯s East Sea  China National Offshore Oil Corporation (CNOOC) Shanghai In plan Maybe compete with west-to-east pipeline 
    Fujian Liquefied Natural Gas (LNG) importing project Guanghui Group Fujian In operation Transmitted by automobile
    A pipeline in Northeast China linking to Russia ¡¡ ¡¡ ¡¡ ¡¡

  1. Capitals from Hong Kong Grab Off 
  2. As early as the planning period of west-to-east pipeline project, some foreign enterprises have made positive reaction to Chinese flue gas supply market, especially those from Hong Kong.

    Though China strictly controlled foreign capital¡¯s entry into social public service areas before, the ¡°flexible¡± capitals from Hong Kong still enter the market. Due to their early accession, they have benefit a lot.

    HK & CHINA GAS (00003 HK), Panva Gas Holdings Ltd. (08132 HK), Xinao Gas Holdings Limited (02688 HK), Wah Sang Gas Holdings Limited (08035 HK) enter domestic fuel gas pipe networks by stock controlling, purchase and joint stock.

    Some heavy weight fuel gas companies, like GAZ DE FRANCE, concentrate on capitals of China¡¯s large provinces.

    Domestic listed companies, like SHENERGY CO., LTD. and XINJIANG GUANGHUI STONE CO., LTD also enter the fuel gas pipeline field.

    Table 2 Foreign Companies who Plan to Invest in China Domestic Fuel Gas Market
    Country or region
    Targeted area
    Areas that already involved in
    HK & CHINA GAS HK Medium-sized city Zhongshan, Guangzhou, Suzhou, Qingdao and Zhuhai Li Zhaoji Family
    Panva Gas Holdings Ltd. HK Medium-sized city Changsha, Guizhang, Xiangtan, Nanjing, Kunming Li Jiacheng Family
    Xinao Gas Holdings Limited HK North China Some suburbs of Beijing, Langfang, Liaocheng and Qingdao Listed in Kong Hong
    GAZ DE FRANCE France Capitals of provinces
    International giant
    US Houston  US Capitals of states in US
    International giant

  3. Success of West-to-east Pipeline Project 
  4. In July 2002, the west-to-east pipeline project officially started. The places along the pipelines are key of foreign investment, especially lower reaches of Yangtze River.

    Because the urban gas pipelines are controlled by local governments and their subordinate companies, so the gas suppliers in upper reaches usually face the problem of ¡° the last km¡±. Before the starting work of west-to-east pipeline projects, some adventurous investors had already arrange the market. For instance, Panva Gas Holdings Ltd. has already signed contracts with fuel gas sectors in many cities of Yangtze river basin and set up over ten companies.

  5. Northeast China linking to Russia  
  6. It is estimated that in 2005 the gas from Russia will begin to enter Chinese market. According to the information from related sectors, China will receive 20 billion cubic meters and will be stable in 30 years.

    It is said that the market of Russian gas market will cover China¡¯s Northeast region and North China, and even South Korea and Japan. The gas from Russia is rich in reserves, good in quality and with cheap price, so the price of the end users will be with RMB 2 yuan. (Table 3)

    The inside experts deem that in case the agreement of cooperation among Russia, China, Japan and Korea is signed successfully, the fuel gas industry in Northeast China and North China will be a new hot spot of investment.

    Table 3 Comparison on Current Prices of Fuel Gas Supplied in Chinese Market
    Fuel  Unit  Price  Price of per million calories Price of per million BTU Price of per GJ
    Homemade  Kg 1.96 168.24 42.4 40.18
    Liquefied petroleum gas (LPG) Kg 1.54 131.8 33.21 21.48
    Urban coal gas Cubic meter 0.9 200 50.4 47.77
    Russian natural gas  Cubic meter 1 119.05 30 28.43
    Natural gas of Shaanxi, Gangsu and Ningxia Cubic meter 1.31 155.95 39.3 37.25
    Imported LPG Cubic meter 1.5 178.57 45 42.65

  7. Who Will be Purchased     
Because many foreign investors think highly of the market, so estimated prices of some domestic gas companies go up. (Table 4) Among those companies, the companies in Northeast China and Coastal areas become the better choices for foreign investment.

Table 4 Part of home listed gas companies

Company  Code  Business  Targeted areas Note 
Changchun Gas Co.,Ltd 600333 Producer of pipeline gas Jilin  Biggest in Jilin
Hainan Minsheng Gas Corporation 000793 Gas pipeline and gas reserves Hainan Main force in Haikou
SHANGHAI DAZHONG ENTERPRISES OF SCIENCE AND TECHNOLOGY,LTD. 600635 Coal gas, natural gas and gas transmission Shanghai Purchased fuel gas business
Sinopec zhongyuan petroleum co., ltd. 000956 LNG Jinan Gas and oil producer
SINOPEC SHENGLI OIL FIELD DYNAMIC GROUP CO.,LTD 000406 Civil natural gas Hunan and Hubei Joint project
SHENERGY CO., LTD. 600642 Natural gas Shanghai  Investor
XINJIANG GUANGHUI STONE CO.,LTD 600256 LNG Fujian  Supported by local government of Xijiang 

Yi Yang, Natural Gas Market: Competition between Sino and Foreign Capitals in China, ¡°China¡¯s Petroleum and Petrochemistry¡± No. 10, 2002