Kunlun Energy, PetroChina's gas distribution and infrastructure unit, plans to invest HK$22 billion this year building gas pipelines and liquefied natural gas (LNG) processing plants, as more petrol- and diesel-powered vehicles are converted to run on natural gas.
With the new infrastructure, Kunlun aims to increase total gas sales, both piped and liquefied, by an average of 30 per cent annually over the next five years.
The key to achieving the target was the rate at which vehicles were converted to gas from diesel and petrol, Kunlun chairman Li Hualin said after the firm's annual meeting of shareholders.
"For every 500 million cubic metres of LNG used by vehicles annually, the consumption of 40 million tonnes of diesel and gasoline can be replaced," he said. "This is cost-saving and Kunlun aims to lead the world on this."
Kunlun sold 660 million cubic metres of LNG last year, according to a Sanford Bernstein research report. The mainland produced 260 million tonnes of diesel and petrol last year.
It costs US$70,000 in the US to convert a truck to being natural gas-powered from diesel-powered and US$20,000 on the mainland, the US brokerage's report said. Even taking into account the higher gas price on the mainland, it takes only 21 months to recoup the cost of conversion there, compared to 46 months in the US.
Li said he had visited the US, Japan and South Korea, which were all in the early stages of the adoption of gas for vehicles. He added that none of the firms in those countries could rival Kunlun on operating scale.
"US President Obama has visited our US peer, Clean Energy, which is also promoting the replacement of diesel with gas, but without being pushed as a national strategy [like on the mainland], the pace of development cannot be as fast," Li said.
Li said Kunlun's daily gas liquefaction capacity was expected to double by the end of the year, from 4.53 million cubic metres at the end of 2012. Sanford Bernstein's analysts said Kunlun was aimed to double again its capacity by the end of 2014.
Kunlun had no plan to raise capital through the issuance of shares or bonds, he added.
The company had 19.6 billion yuan (HK$24.8 billion) of cash and a net debt-to-equity ratio of 27 per cent at the end of 2012. It generated 10 billion yuan of cash from operations last year.