China Gas and Hubei Province Natural Gas join forces

The co-operation will strengthen the latter’s penetration into and expansion in the downstream natural gas business in Hubei Province.

Leading PRC piped-gas operator China Gas Holdings Limited (“China Gas”) has announced that on 30 August 2011, the Company has entered into the Co-operation Framework Agreement with Hubei Province Natural Gas Development Company Limited (“Hubei Province Natural Gas”) pursuant to which both parties agreed to jointly invest in and develop the downstream natural gas market in the cities of Hubei Province.

The development plan includes but is not limited to: (1) those cities and counties in the province to which natural gas is not yet available; (2) those industrial parks, development zones, technology zones in the province with large natural gas demand; (3) the restructure of existing gas companies in the province; (4) expansion into neighboring provinces; and (5) compressed natural gas refueling station business.

Both parties will form joint venture entities within counties and cities of Hubei province for investment projects when relevant concession rights to operate or investment agreements have been concluded. By the end of 2011, Hubei Province Natural Gas will enter into agreement in relation to its participation in the shareholding of at least one city gas enterprise of China Gas in Hubei Province. Hubei Province Natural Gas is the natural gas control platform for the Hubei Province, the receiver of natural gas from the “Sichuan-East” and “West-East II” pipelines etc, as well as the signing authority of natural gas supply contracts designated by the Hubei Provincial Government. It will support China Gas in pipe gas supply and multiple gas sources with its “Seven trunklines and 15 city gates” project, so as to satisfy, to the largest extent and within the quotas allocated by the provincial government, the gas demands of those city gas companies of China Gas in Hubei Province.

China Gas will support the Hubei Provincial Government in its development of the provincial natural gas control and safety platform, and agree to take steps to work out Hubei Province Natural Gas’s cooperation in the construction of the branch pipelines of China Gas’s existing pipelines in Hubei Province. The Group will also provide support to the operations of these projects with its advantages in human resources and corporate management. Proportions of the actual investment from each party would depend on the scale and circumstances of the investment projects, and be implemented progressively, according to a China Gas report.

Mr Eric Leung, Joint Managing Director and President of China Gas, said, “We are excited about the prospects of future co-operation with Hubei Province Natural Gas in the natural gas business within Hubei Province. This co-operation will strengthen the Group’s penetration into and expansion in the downstream natural gas business in Hubei Province, enhance the Group’s security as well as volume of natural gas supplies to the city gas projects of the group in Hubei Province, further enhancing our competitiveness and boosting returns to shareholders. This cooperation demonstrates and will further improve the solid relationship between the Group and the Hubei Provincial Government”.