Henan Fortune Green Energy Development Company commenced sales of liquefied natural gas (LNG) from its second LNG plant in February. Fortune Oil expect significant growth in the demand for LNG sourced from domestic gas resources and transported by road, although there is also increasing competition in this sector to meet that demand.
China Economy
Fixed asset investments surged by 31% in the first four months of 2009, compared with the same period in 2008, according to the National Bureau of Statistics. This investment was driven by the nation’s economic stimulus measures and strong growth in lending. The PRC government expects domestic demand growth to bring about an early recovery for China’s economy and the government target for GDP growth in 2009 remains at 8%.
The global export markets remain weak, with China’s exports in April 2009 being 23% lower than in April 2008. This continues to reduce demand for energy in China’s manufacturing sector. However, the demand for clean energy remains strong and the company’s gas sales are on the whole still limited by infrastructure and supply availability rather than by demand.
Coal Bed Methane
Following the designation of the Liulin CBM block as a State Science and Technology Significant Project, CUCBM and Fortune Liulin Gas (FLG) are planning how to expedite reserves certification at Liulin. Currently the parties intend to apply for reserves certification for a northern section of the block later this year and to drill a significant number of vertical wells in the southern section.
In the northern section of the block FLG has completed drilling of a new well which will soon be fracture stimulated along with two wells that were drilled by a previous operator. Four of the five other pilot production wells have produced gas at flows above the required threshold for certification.
Oil Sector Operations
Bluesky’s volume sales of jet fuel from first quarter of 2009 were 0.46 million tones, an 8% increase over the same period in 2008. A portion of this increase was due to the opening of the federal Express Asia Pacific hub which commenced operations in early 2009. The level of accounts receivable at Bluesky has reduced since the end of 2008 because of the lower jet fuel price and because of successful efforts in collection of receivables.
Throughput of crude oil at the Maoming SPM in the first quarter of 2009 was 2.4 million tones, an increase of 19% over first quarter of 2008. The SPM was overhauled in April 2009 and no crude deliveries occurred during the maintenance period. The Maoming SPM has now been successfully re-commissioned and is operating smoothly, with five tankers delivering 1.2 million tones of crude in the four weeks since start-up. Utilization of the West Zhuhai products terminal was lower in first quarter 2009 than in first quarter 2008 because of the absence of bonded products storage and smaller shipment sizes.
Fortune Oil’s wholly-owned trading business increased its sales three-fold in the first four months of 2009 compared to the same period in 2008, particularly through the import of fuel oil and base oil.
Till date in 2009 there have been no lost time accidents at any of the company’s operations.
Financial Position
Fortune Oil’s cash balance exceeds the outstanding Group bank loan balances and the board envisages no difficulties in meeting both current loan repayment obligations and investment commitments.
