AsianOil: China Gas, Sinopec forge deeper ties

Natural gas distributor China Gas has agreed to forge a closer working relationship with state-owned Sinopec Group in the natural gas import and distribution segments.
The privately owned infrastructure operator said on March 4 that the two had signed a strategic co-operation framework agreement that would mainly focus on natural gas, liquefied natural gas (LNG) and liquid petroleum gas (LPG).
The two firms intend to establish a gas trading company as well as a joint venture to handle downstream gas interests and investments. China Gas said the trading company would buy gas on its behalf from Sinopec, while the joint venture would handle the merger and acquisition (M&A) of downstream gas companies as well as the acquisition of new downstream gas project concession rights. China Gas said it would “tentatively control” the downstream joint venture.
In the LNG space, Sinopec is expected to invest in the two companies’ newly established LNG receiving terminal projects, with China Gas noting that the investment would help it to realise its import strategy more quickly.
China Gas said its focus on local gas distribution, storage and sales would synergise with Sinopec’s infrastructure network, allowing the two companies to co-operate in developing “gas/recharging pole joint stations, LNG distribution warehouse and relevant logistics system, as well as jointly develop initiatives in the transportation energy business”.
China Gas said it would work with Sinopec to establish a national association of LPG importers, co-ordinate external procurement of the fuel and push for the creation of a Chinese LPG import price index.
China Gas will allow Sinopec to rent and use its LPG terminals and storage facilities in order to support the state major’s onshore LPG business. The two sides will also conduct joint feasibility studies into building LPG storage capacity in coastal and riverine areas as well as working together to supply LPG consumers.
China Gas chairman and president Liu Ming Hui said the agreement would help his company to ramp up its LNG imports as it strives to diversify its supplies and lower its gas purchase costs.
He added: “The comprehensive co-operation … will strengthen [China Gas’] extensive deployment in the upstream, midstream and downstream of LPG, greatly promoting the utilisation rate of assets such as terminals and storage areas, and realise the rapid development of trading and terminals, terminals and our new Smart MicroGrid business as we embark on its full value-chain development."
China Gas has a wide range of piped gas distribution and infrastructure projects, as well as a licence to import and export LNG and other fuel products in China.