China Development Bank agreed to inject 20 billion yuan (US$2.5 billion) to help China Gas Holdings Ltd. (China Gas) meet the goal of supplying natural gas to at least 80 cities by 2010.

 

To assist the emerging gas supplier in exploring overseas markets, the bank also expressed willingness to provide additional finance "at any time when China Gas needs support."

 

The agreement was signed yesterday in South China's Shenzhen, where China Gas is based. The Hong Kong-listed joint venture was set up four years ago after the country's deregulation of the urban natural gas supply market.

 

"Generally speaking, our agreement includes three strands," said general manager of China Gas Liu Minghui. "It will help us expand our natural gas supply network, build up confidence to explore overseas markets and improve our corporate governance."

 

Liu said the loan of 20 billion will not only speed up construction of natural gas networks in 48 cities, but will also be "helpful for us to expand supply networks in new cities."

 

The company has chosen cities with populations of more than 1 million as their major potential market, and their business is designed to reach 80 out of China's 660 cities in total in the coming five years, said Liu.

 

China Development Bank said its financial support has tallied with the central government's industry policy, which encourages investment in natural gas exploration and supply for cities.

 

"Our agreement will also help China Gas seek more business opportunities in overseas markets," said a statement from the bank.

 

Liu said the company has formed a close partnership with banks and companies from Europe, India and western Asia.

 

The Indian state-run gas transporter GAIL, Korea Gas Corp, the Republic of Korea's dominant gas supplier, and City Gas Pte Ltd, the gas distributor owned by Singapore's state-owned investment company Temasek Holdings Pte Ltd, have all become shareholders of China Gas Holdings.

 

"In addition we have been building up our competitiveness in the global natural gas market," said Liu.

 

Despite the fact that China relies on coal and oil for about 90 percent of its fuel, the country has decided to use natural gas to decrease atmospheric pollution.

 

Natural gas is expected to contribute 8 percent of the energy mix by 2010, up from the current 3 percent.

 

China Gas, which has investments in more than 58 projects in provinces including Hubei, Guangdong and Hebei, plans to sell 5 billion cubic meters of natural gas each year by 2010. In 2004, it sold about 39 million cubic meters to household residents and industrial users.

 

(China Daily January 24, 2006)