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Denise Tsang

Xinao Gas Holdings plans to supply piped gas in Luoyang, Henan province, with an investment of 400 million yuan, making it the utility's largest project.

The Langfang-based company yesterday  agreed with a subsidiary of China National Petroleum Corp (CNPC), the country's No1 oil firm, and state-owned Luoyang City Gas Corp,  that the industrial city could get liquefied natural gas (LNG) as soon as this winter.

Executive director and deputy general manager Jin Yongsheng said the alliance with CNPC's downstream project investment arm, China Huayou Group, would ensure sufficient supply of gas and Luoyang Gas would contribute its pipeline assets and customer base.

'It is our fourth project committed  this year,' he said. 'It has a high growth potential, and its internal rate of return is estimated at above 15 per cent.'

The parties agreed to form a joint venture with a registered capital of 120 million yuan, with Xinao taking up a 51 per cent interest, China Huayou 19 per cent and Luoyang Gas the rest.

With the city's 1.5 million urban population heavily relying on dirtier coal gas and its supply failing to meet demand, the Luoyang project had plenty of room for development, Mr Jin said.

The trio planned to plough 400 million yuan into the project to upgrade Luoyang Gas' 400km gas pipeline network, coal gas storage facilities and the construction of two LNG processing plants, he said.

They would also discuss the construction of an 80km natural gas pipeline from the Boai field to Luoyang at an estimated cost of 80 million yuan, he said. This means in the near term, the Luoyang project would rely on LNG.

To meet the prolific demand for gas meters on new projects, Xinao paid 14.5 million yuan for an 8,051 square metre site and related production facilities in Langfang.

The acquisition price of the assets controlled by Xinao chairman Wang Yusuo, was on par with its existing value but almost doubled the total investment of 7.8 million yuan he made two years ago.

'Property prices in Langfang have appreciated rapidly  in the past couple of years,' Mr Jin said. 'If we wait  two more years for the acquisition, we don't think we'll be able to buy the land at this price.'

He said it was more economical to make its own gas meters, which were estimated to be 17 per cent cheaper than from outside sources.



Xinao Gas venture to supply Luoyang