Hong Kong and China Gas (Towngas) has sealed two piped-gas supply agreements with Shandong worth 500 million yuan (HK$470 million) to capitalise on the mainland's energy deregulation. Towngas, the dominant piped-gas supplier in Hong Kong, signed agreements yesterday to supply natural gas in eastern Jinan, Shandong's capital, and Weihai, the province's top tourist city and military port, under 50-year franchises. Towngas will hold 60 per cent in the Jinan project and state-owned local partner Jinan Pipeline Gas Co the balance. The Weihai project will be equally owned between Towngas and state-owned firm Weihai Gasworks General. 'These investments represent a further step forward in Towngas' strategic expansion into the city piped gas market of Shandong province, as both the cities of Jinan and Weihai enjoy high economic and political status in the province,' Towngas managing director Alfred Chan Wing-kin said. 'After establishing a strong presence in the Pearl River Delta and eastern China, we consider Shandong Province as our next most important mainland market. We believe it could help consolidate our natural gas operations in eastern China.' The new projects will boost Towngas' portfolio in Shandong to six and 18 mainland-wide. Chinese authorities encourage foreign investment in piped-gas distribution and the use of environmentally friendly natural gas. The Jinan and Weihai projects will each involve 250 million yuan of investment and a registered capital of 100 million yuan. Towngas said the eastern part of Jinan was undergoing extensive development, with a targeted population of 950,000, over 120 square kilometres, and planned industries for power generation, petrochemicals, high-technology and pharmaceuticals. In Jinan, there are 260,000 piped-gas users, including many heavy industry end users. Weihai, which has an urban population of 550,000, ranks among the mainland's top cities for gross domestic product, at 704 million yuan last year. The city is building its gas pipeline network, which will carry liquified natural gas and liquified petroleum gas initially. It is expected that natural gas will be available in 2008 when a gas pipeline between Bohai and Yantai city is due for completion.