Chinese oil and gas supply infrastructure firm Fortune Oil has acquired a liquefied natural gas and compressed natural gas production and distribution enterprise, which will be renamed as Fortune Green Energy (Henan) Development Company Limited.
Fortune Oil said that the acquisition of Green Energy, formerly Zhongyuan Green Energy Hi-Tech Company Limited, is a major step forward in creating an integrated gas business in China. Fortune will acquire a 51% stake in Green Energy, in return for GBP4.7 million of new equity. The company will also provide a GBP4.9 million loan to Green Energy.
Green Energy, which operates China’s first commercial liquefied natural gas (LNG) liquefaction plant, constructed by its former parent company Sinopec at Puyang in 2002, will use the funds to finance new investments and to repay a GBP6 million loan to Sinopec.
Green Energy’s LNG production plant has a design capacity of 55 million cubic meters per year, which is expected to be achieved after the installation of new compressors in July 2007. The LNG is delivered by specialized road tankers to LNG storage tanks at end users in cities such as Beijing and Qufu.
Green Energy also sells 34 million cubic meters per year of CNG from its eight stations that supply natural gas fuel to a local user base of 5,000 buses and taxis. Green Energy has investments in another three CNG stations and plans to develop further CNG stations in the Puyang area. In addition, the company currently owns a fleet of 18 LNG and CNG distribution trucks.
Fortune Oil said that, through this acquisition, it had sealed a major aspect of the technology and resource required to develop a gas distribution network in the world’s second largest energy industry. The company expects Green Energy’s existing assets to generate an annual net profit of GBP1 million to GBP2 million in the initial years, and that the acquisition will be earnings-enhancing in 2007.
Qian Benyuan, chairman of Fortune Oil, commented: For many of China’s recent gas developments such as coal bed methane, LNG offers the most economic way of transporting gas to end-users, as it will be many years before the country’s pipeline infrastructure can be fully developed.
The remaining 49% of Green Energy will be held by 491 of the company’s staff. Prior to the agreement with Fortune Oil, Green Energy was employee-owned, after a recent privatization agreement with Sinopec.