ENN fires up expansion of gas refuelling network
Hebei firm aims to blaze a bigger trail into the mainland's transport market as Beijing pushes adoption of the cleaner energy source
City-gas distributor ENN Energy plans to expand its mainland network of liquefied natural gas (LNG) stations more than seven-fold over the next few years to grab a bigger share of the country's clean-fuel market.
The Hebei province-based firm controlled by tycoon Wang Yusuo aims to have 500 of the transport refuelling points by 2015, up from 67 LNG and 25 compressed natural gas (CNG) stations as of the end of last year.
Chief executive Cheung Yip-sang said the company planned to spend up to 800 million yuan (HK$988 million) this year to build 30 to 40 CNG stations and 100 LNG stations. "We have been studying how to develop the LNG transport market for the past three years, which gives us a head start," Cheung said.
He said the number of LNG stations on the mainland was forecast to rise to 3,000 by 2015 from 500 last year, so ENN's stations could account for 16.6 per cent of the national total in 2015, up from 13.4 per cent last year.
With each LNG station costing up to six million yuan to build, according to Cheung, ENN might have to spend up to 2.6 billion yuan to reach the 2015 target.
LNG, which is liquefied at ultra-low temperatures and can be transported over long distances economically, is used mostly by heavy-duty trucks, buses and ships. Within cities, it is used mostly by cars. Beijing is encouraging adoption of natural gas to cut pollution because the fuel emits 90 per cent less particulate matters, 20 per cent less carbon dioxide and 87 per cent less nitrogen dioxide than petrol.
The authorities expect the mainland's gas demand to rise from 131 billion cubic metres (bcm) in 2011 to 230 bcm in 2015, or at an annual average pace of 11.9 per cent.
While 67.3 per cent of ENN's gas sales last year were to industrial and commercial users and 11.1 per cent to households, there has been faster growth in refuelling at CNG and LNG stations. The category was 18 per cent of ENN's sales last year, up from 16 per cent in 2010.
With CNG and LNG prices well below that of petrol and diesel on a per kilometre basis, cost competitiveness is leading to greater conversion of traditional engines to dual-fuel ones.
But according to a Daiwa Securities research note, ENN's LNG stations have been running at just 30 to 50 per cent of capacity, amid technical problems in converting diesel engines to LNG ones. This means the stations mostly serve new LNG trucks. ENN's parent, ENN Group, has recently teamed up with Canadian LNG engine developer Westport Innovations to speed up engine conversion.
Cheung said the number of new LNG trucks was projected to rise from 76,000 last year to between 120,000 and 150,000 in 2015.
According to US brokerage Sanford C. Bernstein, some 694,000 heavy-duty trucks on the mainland might run on LNG by 2020, making up 6 per cent of the fleet, up from 1 per cent now.
The Daiwa report quoted ENN management as saying the group planned to build 200 LNG refuelling stations along highways in North America in the next three to five years.
Cheung said since this operation was in early development and faced substantial uncertainty, ENN Energy had no plans to acquire it from the parent.