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Xinao proceeding with 1.5b yuan LNG project in Wenzhou


Xinao Gas Holdings would press ahead with a 1.5 billion yuan liquefied natural gas (LNG) processing project in Wenzhou, Zhejiang, and might build a second such plant, chief executive Yang Yu said yesterday.

The Hebei-based gas distributor, whose first-half net profit rose 40 per cent to 175.49 million yuan while revenue soared 59.3 per cent to 2.3 billion yuan, was seeking National Development and Reform Commission approval for the Wenzhou project after obtaining a licence to import LNG last year.

The plant, the company's first LNG processing project, will help ensure stable supply of the clean fuel for the group's downstream urban gas distribution as the country's gas-led fuel policy leaves supply growth lagging behind that of demand.

'We plan to build one or two LNG receiving terminals in the mainland,' Mr Yang said.

The Wenzhou project, designed with a capacity to process three million tonnes of LNG annually, will provide an alternative source of the fuel to its 66 urban piped-gas projects around the country, which until now rely heavily on PetroChina's 3,840km west-to-east gas pipeline and an LNG terminal in Shenzhen.

Mr Yang conceded that the Wenzhou project would be challenged by high import prices after PetroChina signed an LNG purchase contract worth between A$35 billion (HK$232.2 billion) and A$45 billion with Australia's Woodside Energy.

'Certainly the deal will affect the import price [on the Wenzhou project],' Mr Yang said.

The PetroChina deal, signed two weeks ago and sourcing two to three million tonnes of LNG annually for 15 to 20 years, marks the mainland's first LNG import arrangement to charge international prices in a few years.

Privately owned Xinao is the fourth firm, after the country's biggest three oil firms - PetroChina, Sinopec and CNOOC, to be granted the right to import LNG.

Gas sales at Xinao almost doubled to 793.75 million cubic metres in the first half, putting the group on track to achieve its full-year target of 1.6 billion cubic metres, said executive director Wilson Cheng Chak-ngok.

The margin on earnings before interest, taxation, depreciation and amortisation shrank 5.91 percentage points to 26.31 per cent, which Mr Cheng linked to a smaller contribution from one-off connection fees paid by end users for gas services.

He said more reliance would be placed on gas sales in order to sustain growth.