Air Liquide Group's plant in Zhangjiagang, Jiangsu province. Driven by increasing demand, the company will continue strong investment in China. [China Daily]

Air Liquide Group, the world's largest industrial gas producer by revenue, has launched the second phase of its investment program, called Tengfei II, in China this year. The program caters to the country's growing demand for oxygen, nitrogen, hydrogen and other gases.

The French company started the first phase of its investment program, Tengfei I, in 2007. The program has planned an investment of $398 million and employment of more than 500 new employees every year. Currently, the company has 4,000 employees operating 64 plants in 16 provinces.

Remi Charachon, president of Air Liquide (China) Holding Co Ltd, says Tengfei II will run until 2020 and the French company will continue strong investment and maintain good profitability in China, especially in its west and northwest regions.

The new investment will be spent on expanding Air Liquide's manufacturing facilities, on-site production, technology research, medical gas supply network and Chinese companies' outsourcing production of non-core products.

Industrial gases and related technologies are indispensable to a wide range of industries. They can be applied in healthcare, such as medical oxygen and anesthetic gas, clean energy, high-tech industries such as advanced coal gasification, metallurgy, chemicals, petrochemicals, automotives, food and pharmaceuticals, which are among China's top development priorities.

"China's policies to cut greenhouse gas emissions and improve energy efficiency have offered industrial gas makers great opportunities to maintain a fast growth rate in the world's second-largest economy," says Charachon, who became Air Liquide's China head in 2004 and is also chairman of Singapore-based Asia Industrial Gas Association for China.

In the past two decades, China's inexpensive labor force and resources have assisted the boom in its manufacturing sector, which has had the unfortunate side effects of low profit, heavy pollution and increased energy consumption.

Realizing that these outcomes will slow its economic growth, the Chinese government has pledged that it will cut carbon emissions for each unit of GDP by 17 percent by 2015 from 2010 levels.

China's coal-fired power plants, petrochemicals companies and steel and cement producers have all scrambled to reduce emissions to prevent having their bank loans stopped or operating licenses revoked by the government.

Charachon says under such circumstances China is seeking high-standard technologies to produce gasoline with lower sulfur, a process that needs hydrogen.

"There are huge projects linked to energy, for instance transforming coal into gasoline or synthetic natural gas requiring a huge quantity of oxygen and also some other technologies."

The 51-year-old says the emerging trend of outsourcing non-core products to big companies has also brought opportunities to Air Liquide to expand into new regions.

It recently formed a joint venture with Maoming Petrochemical, a subsidiary of China Petroleum & Chemical Corp in Guangdong, to build an air separation unit with a capacity of 3,000 tons of oxygen daily to provide gases for the coal-to-hydrogen project of its existing refinery.

Sun Fuquan, a researcher at the Chinese Academy of Science and Technology for Development in Beijing, says demand for industrial gases will continue to surge over the next decade because of the rapid development of China's healthcare, electronics, photovoltaic, engineering, environmental and urbanization-related industries.

China has become a big buyer of these gases in recent years. It used 76 billion yuan ($12.39 billion) of industrial gases last year. The China Industrial Gas Association expects China's demand for industrial gases to reach $15.94 billion by 2016.

"Stable Chinese market growth has further fueled the expansion of foreign industrial gas providers such as France's Air Liquide SA, Germany's Linde AG, the US companies Praxair, Air Products and Chemicals Inc, because they have sophisticated technologies to produce high quality gases and set long-term product goals for energy, water and chemical use," Sun says.

Even though Chinese gas makers outnumber international players in the domestic market, they are still not fully competitive, because they cannot make high-capacity air separation units.

Operating in 80 countries across the world, Air Liquide posted sales of 15.3 billion euros and net profit of 1.6 billion euros in 2012, up from 14.5 billion euros and 1.53 billion euros a year earlier. Charachon says Air Liquide's gas and services sales in China rose 15 percent last year. The country has become the company's fifth-largest global market after the United States, France, Japan and Germany.

To further increase its presence in China, Air Liquide signed a long-term contract with Fujian Shenyuan New Materials Co Ltd in May to supply industrial gases for its caprolactam production project in Lianjiang Kemen Economic and Development Zone in Fujian province.

It will invest in an industrial gases complex of eight units including an air separation unit of 2,000 tons of oxygen a day, a gasification unit, a purification unit of synthesis gas and an ammonia plant to supply hydrogen, nitrogen and ammonia.

They will purify synthesis gas and avoid sulfur emissions, which are responsible for acid rain.

These plants will be operational in 2016 and they will be able to produce 75,000 cubic meters per hour of hydrogen and 250,000 tons per year of ammonia.

Charachon says another sector that Air Liquide has been engaged in is China's photovoltaic industry, to which it provides high-purity gases.

"This industry is facing a number of difficulties, such as overcapacity, potential anti-dumping tariffs from the EU, declining prices and low efficiency. We believe that the truth will come out and there will be consolidation in the industry and the emergence of a few key players."

Charachon believes that China's photovoltaic industry will recover step by step.