Retailing, Franchising, and Consumerism Business Intelligence in China

Sinoenergy Announces Intention Agreement with Sinopec

Sinoenergy Corporation, a manufacturer of compressed natural gas vehicle and gas station equipment as well as an operator of CNG stations in China, has signed an intention agreement with Sinopec to secure the supply of 200 million cubic meters of natural gas per year to Hubei Gather Energy Gas Company, a 55% subsidiary of Sinoenergy, to supply CNG vehicles for 20 years once the Sichuan-Shanghai gas pipelines starts its operation.

Hubei Gather is formed by Sinoenergy and Hong Kong China New Energy Development Investment Co. Ltd, and is expected to be capitalized with US$5 million of partner investments. It plans to build and operate compressed natural gas plants within Wuhan city and Huangmei country in Hubei province to deliver CNG to most areas in Yangtze River Delta Region.

Hubei Gather is expected to generate revenue from the natural gas process and whole sale in excess of US$60 million annually under full capacity with net income of US$10 million.

In addition, the 200 million cubic meters of natural gas can be used downstream by 70-80 CNG substations either for substations operated by Sinoenergy or substations owned by third parties.

The construction of Sichuan-Shanghai natural gas pipeline is expected to be completed at the end of 2008 and a final agreement between Sinoenergy and Sinopec is expected to be signed then. The pipeline will mainly carry gas from the Pugang gas field, one of the largest gas fields in China with approximately 700 billion cubic meters of proven natural gas accumulated reserves.

"This natural gas supply agreement with Sinopec for 200 million cubic meters per year is an important achievement for Sinoenergy, and a critical factor to support the growth of our CNG wholesale and retail business in the future," remarked by Deng Tianzhou, chairman of Sinoenergy. "In addition to creating a strong foundation for us to execute our strategy of building and operating CNG wholesale and retail distribution network in central and eastern China, Sinoenergy will strengthen its relationship with Sinopec and gain more opportunities for access to natural gas resources in the future."

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