China Gas Enters into Strategic Cooperation Framework Agreement with Sinopec
China Gas Holdings Limited (“China Gas” or the “Group”; stock code: 384), a leading piped-gas operator in China, announced yesterday that it has entered into a strategic cooperation framework agreement (“Agreement”) with China Petrochemical Corporation (“Sinopec”) on 4 March 2021. The Agreement will enable both parties to join forces and fully leverage each other’s advantages in resources and downstream market, helping them engage in all-round cooperation in areas including natural gas procurement, liquefied natural gas (“LNG”) receiving terminal utilisation, downstream gas projects, oil and gas (natural gas and hydrogen) stations/recharging poles and liquefied petroleum gas (“LPG”) business. Both parties will therefore seize the immense opportunities generated from China’s clean energy development and energy structure improvement.
Under the Agreement, the Group will commence strategic cooperation with Sinopec in three main areas. In the natural gas business, both parties will study and cooperate in the establishment of a natural gas trading company. This trading company will be responsible for centralised procurement from Sinopec’s natural gas resources pool based on the Group’s needs. The parties will also cooperate in the establishment of a joint venture company that is tentatively controlled by China Gas. This joint venture company will be responsible for the merger and acquisition of downstream gas companies, as well as acquisition of downstream gas project concession rights.
As for LNG business, Sinopec will support China Gas to invest in their newly-established LNG receiving terminal projects, and it will enjoy the window period rights for receiving and unloading LNG import resources according to their respective shareholding, enabling the Group to realise its strategic LNG import plan as soon as possible. Also, by leveraging the Group’s logistics advantages in regional city gas projects, coastal LNG imported trade and onshore LNG logistics capacity, as well as giving play to the layout of Sinopec’s petroleum/gas stations, both parties will cooperate 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.
With regards to LPG business, the Group being the largest vertically integrated LPG business service provider, will deepen its cooperation with Sinopec in the fields of LPG trading and logistics, including jointly facilitating the establishment of the national association of LPG importers, coordinating external procurement, and promote the formulation and application of China’s LPG import price index. The parties will also conduct a joint study on the feasibility of investing in the construction of public liquefied hydrocarbon storage facilities in coastal and riverine areas, as well as explore the feasibility of commencing cooperation in the supply of liquefied hydrocarbon resources. China Gas will also allow Sinopec to rent and use its LPG terminals and storage facilities in order to provide support to Sinopec’s onshore LPG resources operation.
Mr Liu Ming Hui, Chairman, Managing Director and President of the Group, said, “China is pushing ahead strongly in its development for green energy and an enhancement in energy ecosystem comprising production, supply and storage, in an effort to promote the mass adoption of clean energy using market-based principles. As a leading piped-gas operator, China Gas has strived to enhance its core competitiveness through business and market innovation over the years to achieve high-quality and all-rounded business growth. The Strategic Cooperation Framework Agreement with Sinopec represents a major market breakthrough for the sustainable and rapid development for the Group. On one hand, the Group will accelerate the pace of the Group’s LNG imports to diversify supply sources while lowering gas purchase costs, which will enhance the Group’s ability to guarantee gas supply. On the other hand, the comprehensive cooperation between the two companies in various aspects such as LPG resources supply, trading and logistics will strengthen the Group’s extensive deployment in the upstream, midstream and downstream of LPG, greatly promotingthe utilization rate of assets such as terminals and storage areas, and realize the rapid development of trading and terminals, terminals and our new Smart MicroGrid business as we embark on its full value-chain development.”
“Driven by the country’s push for more stringent environment protection policy and reforms in energy structure, the development of clean energy industry is expected to continue, providing an important policy backing to support China Gas’ fast and sustainable growth. On February 21, 2021, China issued 2021 No. 1 Central Document titled ‘Opinions of the Central Committee of the Communist Party of China and the State Council on Comprehensively Promoting Rural Revitalization and Accelerating Agricultural and Rural Modernization’. It stressed ‘the promotion of gas to villages and support for the construction of safe and reliable village gas tank stations and microgrid gas supply system’. After eight years of exploration and integration of new technologies such as IoT, 5G and cloud platforms, the LPG Smart MicroGrid gas supply system developed by China Gas has ushered in a huge development opportunity. The strategic cooperation with Sinopec will help the Group enrich the resource supply channels and accelerate the nationwide expansion of its new business of Smart MicroGrid. It shall also provide ‘smart’ energy for the society and the public, and provide diversified green energy for the national economic development, as well as to create greater value for our shareholders, society and employees.”
Source: China Gas Holdings Limited