To Mr. James T. Roe III

President, Carlwood Capital Corporation

Henderson, Nevada

Regarding a natural gas project in Central China with implications for other Chinese areas and assistance in helping us raise funds for our part of this project.

The impetus for this project is China’s lack of sufficient crude oil and natural gas pipeline infrastructure.

Therefore they are choosing to switch from diesel and gasoline powered vehicles to liquefied natural gas (LNG) for power.

In addition, this project includes a “Peak Shaver” as an additional customer for the liquefied natural gas.

Our partner in China is Mr. Philip Yip ( .

It was through his five years of negotiations between China and builder of the LNG plant (Kryopak Inc.

And conversion equipment for vehicles (

The complete cost of this project is 60 million USD shared equally between China and the US. Therefore we are trying to raise 30 million USD for our share.

In February 1998, the project only included 1200 busses and hundreds of taxis. Eventually, the project attracted the attention of a provincial city gas company needing LNG for regasification during the winter months when pipelines would not keep up with demand.

Purchased gas will come from the gas company’s reservoir 170 km from the city, liquefied in Kryopak’s LNG plant, transported by rail to the city and regasified. This is more economical than building a third pipeline into the city, according to management of the gas company.

Natural Gas is sourced from China’s largest gas fields in this province.

LNG will also be transported to refueling stations at the city’s bus company, and several other locations nearby the city.


The Kryopak LNG plant receives 480,000 cubic meters (M3) per day at a cost of 0.68 CNY.

326,400 CNY per day

Two thirds of this (320,000 M3) will be sold back to the gas company at 1.17 CNY.

374,400 CNY per day.

One third (160,000 M3) is purchased by the bus company at 1.70 CNY

272,000 CNY per day.

Together, the gas company and the bus company, total payments =

272,000 CNY per day paid by the bus company

374,400 CNY per day paid by the gas company

646,000 CNY per day.

The Kryopak LNG plants cost for this gas is =

326,400 CNY per day

The difference is =

646,000 CNY per day (bus company plus gas company)

326,400 CNY per day (Kryopak LNG plant costs)

319,600 CNY per day.

Or {Live mid-market rates as of 2003.10.17 23:56:31 GMT.}

38,615 USD per day

In a thousand days (approx 3 years) this is

Over 38 million USD

Construction and Implementation

Upon receipt of 20% down payment (6,000,000 USD), Kryopak Inc. begins construction of the 480,000 M3 liquefaction plant and vehicle conversion equipment (Carburetion and Turbo Systems Inc.) begins assembling 1200 kits.

Fourteen months later 1200 busses will begin receiving LNG and the Provincial capital city (7,000,000 people) begin receiving LNG.

The actual conversion of busses is accomplished by the bus company, who is already familiar with converting their busses to natural gas:CNG – 200 busses currently operating, but at a loss.LNG costs to them from this operation return their investment in 3 years.

All land sites approved for this project are in place because of our Chinese partner.

The provincial government has signed gas purchase and gas sales prices.

The Chinese government and our Chinese partner, Mr. Philip Yip, provide for transportation equipment.

In 1998 this project was a 141,584 M3 per day Kryopak LNG plant for 1000 city busses only. However, we pointed out to the Chinese this was too small to recover investment in conversion of busses at the natural gas price set by the Peoples Republic of China.

Therefore we were able to convince all interested parties in this larger project to return investment to all parties.

The Chinese suggested a much larger project as they became more aware of cost efficiency. However, getting signatures for “take or pay” contracts from them for anything larger than the above project, has not materialized.

Therefore this project stands as it is, and any future project will occur only under our conditions of provincially signed seals of approval regarding gas purchase and gas sales.

This occurs only after the Provincial Planning Committee approves a project.

We have their signed approval for this project.

Initially, the smaller project was only manageable by them and us as probably a break-even return on investment. This was reasonable to the manufacturers of the products if underwritten by the provincial government. They were willing to do this.

However, we felt it in the best interests of future contracts with them in this province, and other provinces, if the project were scaled to the above size in order to return a real investment to all concerned.

The months, turning into years, of meetings here and abroad caused the Provincial Planning Committee to renegotiate a time limit between Mr. Yip and us to accomplish the project as it stands.

Five years have elapsed since this process began and it will end January 01, 2004. After that, we will lose this project to some other players from the western world.

If we are able to come up with the down payment (6,000,000 USD) to the manufacturers of the LNG plant and conversion equipment before January 01 2004, including funds to finish the project (24,000,000 USD more), then we will receive the project.

If down payment is received on December 01, 2003 (and assurance of complete funding), then February 01, 2005 begins production of LNG for vehicles and the gas company.

By February 01, 2008, 38 million USD well be recovered.

February 01, 2011, 76 million USD will be recovered and

February 01, 2014 114 million USD will be recovered.

Other opportunities

China is in its infancy regarding LNG. We, as Kryopak and Carburetion and Turbo systems, have been working in China since 1991. Since then, they have only converted several hundred busses. They have 60,000. Beijing has plans to convert 8,000 busses, yet has only been able to convert a few.

We recommended not using CNG. They did anyway and it has failed.

Their natural gas pipeline infrastructure is not in place, although some attempts have been made in the capital cities. However, it is totally insufficient. Therefore, they are going to LNG for vehicles and regasification plants.

The Chinese have never built their own LNG plant nor do they have the ability to manufacture vehicle equipment for any project of this size: yet.

We think our abilities are completely understood by many different provinces, certainly including the above provincial project and its much larger similarly planed project.

I am including a few E-mails back and forth between Mr. Yip and myself.

There are hundreds over five years including several trips by Mr. Yip to view our LNG projects in several US states.

Thank you Mr. Roe for your attention

Charlie Bartholomew, President

Bookcliff Engineering Inc.


A few correspondences from China Partner to US partner (Charlie Bartholomew) 24 indicated below.


Of course we still have a year to market our LNG to other 28 LNG Gasificationplants in China and other transit companies, taxi fleets as well as factories.Each of these gasification plants is consuming 10,000 to 50,000 M3/day. I would like to summarize the NG vehicles in Xian: = 353,147 ft3 to 1,765,733 ft3 x 0.01gallon LNG/ft3 = 3,531 to 17,657 gal

LNG/day Other companies

YEAR#of NG Bus#of NG Taxi# Gov NG Vehicle# other NG Vehicles

YEARLNG gallons per day

2003876 3300











How much LNG Project consuming now 18 Jul 2003

From: philip_yip8 - Original Message

Dear Charlie, current consumption of the project is depended on volume of LNG delivered to Hong Kong & China


Gas's ventures in China

They asked me to offer price of LNG delivered to their Jiangsu Province's plants. I will have the meeting with their management August 4 when I return back to Hong Kong.

The following is the current stand:

1. Xian Transit 60,000M3/day (1,000 buses at 60M3/day/bus) = 2,118,880 ft3/da(2,119 ft3/day/bus) = 2.211Mcf/day x 10 gal/day/Mcf = 21,188/gal/day (21 gal/day/bus).

2. Taibaishan project 10,000M3/day = 353,147 ft3/day x 0.01gallon LNG/ft3 = 3531 gal LNG/ Taibaishan

3. Hong Kong/ China Gas 30,000M3/day = 1059000 ft3 x 0.01gal LNG/ft3 = 10,590 gal LNG 21,188/gal/day Xian Busses 3,531 gal LNG/ Taibaishan 10,594 gal LNG/ Hong Kong & China Gas 35,313 gallons per day for all three


NG Vehicle in Xian 12 Jul 2003


The followings are the NG vehicle data released by the Municipal

Government of Xian (Red Title Document i.e. officially announced by the Government):

1.Current no. of CNG Dual fuel vehicles: Bus 876, Taxi 3300 total 4176 units.

2.In 2004, will convert or purchase additional NG vehicles, Bus 2900 units, and taxi 5215 units.

3. In 2005-2006 plans to convert & purchase NG vehicles, bus 1150 units, taxi 5750 units and at the same time to convert some municipal fleets e.g. garbage truck etc.

4. In 2007 to 2010, plan to convert or purchase NG vehicles, bus 3150 units, taxi 2700 units, municipal private car fleet 15300 units and private car 10,000 units total 31190 units.

The above figures show there is huge market for LNG in Xian and of course in addition, there are few cities in China already undergoing tests of using LNG as fuel for public transits.I hope the above figures will help you further during your presentation in Chicago next week. Thanks & Best Luck Philip


May 16, 2003: "Regarding to the gas price from gas company,

I have asked Party Secretary of Municipal City of Yulin to instruct his Mayor to help me to negotiate with top management of Gas Company. I hope our cost can come down to RMY0.69 (US$2.50 per Mcf) for next 10 years. "

Taibaishan busses diesel of gasoline 6 Jul 2003

Taibaishan Project The current operator of Taibaishan fleet is using gasoline-powered mid-busses and their contract with Taibaishan County will expire in 2004.We will sign a new contract with Taibaishan County for operation of the fleet using LNG powered mid-busses. We are NOT going to convert the fleet of current operator, as we will purchase brand new LNG powered mid-buses either from Iveco or other suppliers. Best Regards


Signed agreement with Xian Transit on June 2,2003

June 4, 2003 To: Charlie Fr: Philip Re: Xian Transit

I returned back to Hong Kong yesterday and am happy to inform you that I have signed agreement with Xian Transit on June 2,2003. Please find the translation of the agreement from the attached file & if you need the original Chinese copy, I can fax it to you

Please advise. I am still working on the price from ChangQing but it will not affect too much on our overall return of our investment.


Besides [in addition to] the agreement with Xian Transit, I have also working on the following two more clients:

1.Taibaishan: it covers

a) To supply NG for the whole area with LNG as source

b) To set up a LNG refueling station for 100 mid-size busses (17-20 seats)

c) To operate a bus company who has exclusive right to bring tourists to all attractions along the 100 KMS road in the Taibaishan National Park. No other car is allowed to drive into the park area except our busses.

The average tourists per year are 1,200,000 people. With current fare of return trip at RMY30 (US$3.60), it will generate revenue of US$4,000,000 per year.

The revenue generated from a & b are 10,000 M3 NG per day & thus the major profit should come from the bus company.

The agreement with Taibaishan County will be signed when I return back to Xian on mid June.


2.HuangYuan Foundry factory: It requires 35,000 to 50,000 M3 NG per day.We are still working on the price of NG and the cost of gasification plant of which certain percentage has to be borne by our client.


I understand from your last mail that you are still very hard to get the finance for the project, please advise if there is any chance of getting the finance?

We are now running out of time, and if we cannot confirm to build the LNG plant in Yulin, someone for sure will do it very soon. I look forward to receiving further instruction from you soon. Best Regards.


Re: ChungYuen Oil CRY 1.70/NM3

19 Jun 2003From: Philip To: Charlie

Original Message Dear Charlie,

They have offered LNG at CRY 1.70/NM3 or CRY 1.08/liter FOB plant. The plant is located at HeNan Province, which is about 800 kms east of Xian. I have their LNG composition but I left in my desk of Xian office, I shall let you know by next week.

Just for your information, they offered to Beijing Transit at CRY 2.30 - 2.40/NM3 FOB Beijing that is CNG equivalent price. Best Regards


Party B agrees that the selling price of LNG will not be higher than the price of CNG set by Municipal Government for Xian Transit (Current CNG price is RMY 2.05/M3)."


As per agreement with Xian Transit, the min. selling price of LNG is CYR2.05/M3 or US$ 0.712/US gallon US$ 0.712/US gallon - $0.42/gallon = $0.292/gallon x 60,000 gpd = $17,520/day x 3000 day (approximately 9 years) = $52,560,000.


Jiangsu Province as well as Shangdong Province

Their current bid price is CRY1.70 per M3 delivered with volume of 30,000 to 50,000 M3/day in 2004 to over 50,000M3/day in 2005.


We will have closer ties if we decide to have J/V with SNGC. In fact, Mr. Wang, the Deputy Managing Director of Shaanxi Investment Corp., said this afternoon we could set up J/V with them.


The price from SNGC is CRY0.66/NM3 + few cents says 0.68/NM3.


15 Oct 2003 from:

Dear Charlie, Shaanxi Gas delivers natural gas (PNG) to Xian Natural Gas

Corp at CNY1.13/NM3

Shaanxi Investment Guide 10 Jul 2003

Gentlemen: This series of 31 pages will be followed with an introduction to the feasibility study for 1200 busses in Xian, Shaanxi Province China.

Briefly, the purchase price of natural gas and a small profit on the Kryopak Plant will produce LNG at US$ 0.41/US gallon at 60,000 gallons per day. Sales of that LNG in Xian to the Public Bus Company will be US$ 0.71/gallon at 60,000 gallons per day.


Shaanxi Intercontinental LNG Co., Ltd is providing conversions, equipment, and refueling station.

Carburetion and Turbo Systems Inc., is providing the spark-ignited and diesel bus conversion kits. It is assumed NexGenFueling will provide both the LNG tanks and refueling stations.

CD's will be made available for this project soon. In the meantime, please look over the Shaanxi Investment Guide because over half of it pertains to us favorably.

In addition, the Shaanxi Provincial Government is going to create over 40,000 more vehicles to use natural gas by 2007:whether it is CNG or LNG, remains to be seen. However it will be natural gas in some form.

Regards; charlyb


They have offered LNG at CRY1.70/NM3 or CRY1.08/liter FOB plant. The plant is located at HeNan Province which is about 800 kms east of Xian. I have their LNG composition but I left in my desk of Xian office, I shall let you know by next week.

CRY 2.30 - 2.40 /NM3 FOB Beijing

127.5 USD millions1.70 Y/NM3 -.68-x 1000days/8/Y for 3 years

102.5 USD millions at 1.50 Y/NM3

77.5USD millions at 1.30 Y/NM3


Gas to Lng back to gas 12 Jul 2003

Dear Philip;

50,000 M3/day in 2004 = 1,765,733 ft3 1.70 CNY China Yuan Renminbi /m3 = 0.205379 USD United States Dollars 0.205379 USD /m3; 35.3147ft3/m3 = US$


If we purchase 1.8MMcfgpd at CNY 0.74 we should be able to regasify it at CNY 1.48, or the rule of thumb, is to double the purchase price for LNG delivered compared to purchased price. Charlyb


Subject: Re: ChungYuen Oil

Date: Thu, 19 Jun 2003 From: Philip To: Charlie

Original Message

Dear Charlie,

They have offered LNG at CRY1.70/NM3 or CRY1.08/liter FOB plant. The plant is located at HeNan Province which is about 800 kms east of Xian. I have their LNG composition but I left in my desk of Xian office, I shall let you know by next week.

Just for your information, they offered to Beijing Transit at CRY2.30-2.40/NM3 FOB Beijing, which is CNG equivalent price.

Best Regards


Re: Revenue from the 600,000 M3 plant

31 Jul 2003 20:59:33 +0800 (CST) From philip_yip toCharlie Bartholomew

Dear Charlie, The revenue generated from the 600,000 NM3 plant can be divided into two parts:

1. Sale of LNG to SNGC 80,000,000 to 100,000,000 NM3

2. Sale of balance quantity to Xian Transit, Taibaishan project & regasification plants in East Coast at CRY1.60/NM3 FOB Yulin Plant.


When Mr. Chang, General Manager of ChungYuen Oil LNG plant, proposed to SNGC of setting up 1,000,000 NM3/day plant, he said he has no problem to sell all LNG to regasification plants.

If you still have any questions, please kindly let me know.

Best Regards. Philip Yip


Hong Kong Town Gas Co., Ltd in Xian

Sat, 12 Jul 2003

Just for your information, we have meeting with management of Hong Kong Town Gas Co., Ltd in Xian in the past 2 days. They are very interest to get supply of LNG from us for their LNG gasification plants in Jiangsu Province as well as Shangdong Province.

Their current bid price is CRY1.70 per M3 delivered with volume of 30,000 to 50,000 M3/day in 2004 to over 50,000M3/day in 2005.

I have to re-calculate our cost of transportation before we can sign any agreement.


The Hong Kong Town Gas has invested over 80 billion for NG business in China including West to East NG supply project, Guangdong LNG Terminal, supply of NG to Nanjing & Wuhan city and other smaller projects amounting to over 28 projects in total.

If you think it is really necessary to get the contract with Hong Kong Town Gas in order to secure the finance for our project, then I will return Hong Kong earlier and start to negotiate with their top management in Hong Kong.

Best Regards.