HONG KONG (Dow Jones)–Urban gas distributor China Gas Holdings Ltd. (0384.HK) said Monday it expects to import its first cargo of liquefied petroleum gas from the Middle East early next year, following its acquisition of a controlling stake in a Shanghai-based LPG producer and distributor.
China Gas said last week it plans to buy a 53% stake in Zhejiang Zhongyou Hua Dian Energy Co., which produces and sells LNG in China and has more than 10 LPG storage bases along the country’s coast. The deal will need the approval of China Gas’ minority shareholders in order to be final.
Liu Minghui, managing director of China Gas, said in a press conference that the company plans to import LPG on behalf of Zhongyou as early as next year, through its joint venture with Oman Oil Co.
He said the move will help cut a middleman fee that Zhongyou pays other independent traders. He also said the gross profit margin of Zhongyou may accordingly rise to over 8%, from 7.3% currently.
Zhongyou sold 1.05 million metric tons of LPG last year. About half of the LPG it sold was imported from the Middle East via Singapore, with the remainder being sourced locally, mainly from Sinopec, Liu said.
He added that he expects Zhongyou will sell 2 million tons of LPG in 2010.
Zhongyou, in which China National Petroleum Corp. has a 30% interest and Sinochem Corp. has a 3% stake, owns four LPG storage bases in Xiaomen Island and Nansha of Guangdong province, Jingjiang of Jiangsu province and Fangcheng Port of Guangxi province. Each of the bases has a storage capacity of at least 50,000 tons.
Zhongyou also owns seven other smaller LPG storage facilities in southern China with capacity between 20,000 and 50,000 tons each. Some of the facilities also have the equipment to produce dimethyl ether, a substitute for natural gas.