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New Delhi, Feb 13: In a move that will kickstart India-China cooperation in the energy sector, GAIL (India) Ltd and China Gas Holdings are set to sign a comprehensive agreement in the next 2-3 days.
The two gas behemoths will not only formalise GAIL’s 10% equity acquisition in China Gas, but will also sign a heads of agreement (HoA) for jointly pursuing gas-related business opportunities in China as well as in other third countries.
GAIL and China Gas plan to float a new company, with 50-50 equity participation, for investing in natural gas and other energy-related projects in China, including gas pipeline and LNG.
In an exclusive interview to FE, managing director of China Gas Liu Ming Hui said, “We view our relationship with GAIL as very important since this is the first agreement between India and China in the hydrocarbon sector. GAIL will be given priority in our future joint venture deals in the energy sector.”
Mr Hui said the Chinese gas markets are at a nascent stage compared to India. Huge potential exists on the CNG side given the fact that only 1% vehicles in Beijing at present run on CNG. Beijing is in the process of converting its entire transport vehicles to CNG by 2008, he said.
GAIL’s chairman and managing director Proshanto Banerjee said his company was also discussing possibilities to pick up to 50% equity in the gas concessions (licences for undertaking projects in cities) secured by China Gas for marketing CNG in different provinces of China.
Mr Hui said China Gas has been awarded 49 gas concessions for retail marketing of gas covering a total population of 80 million, of which urban population is about 16 million.
Currently, 25 gas concessions, covering 30 million population, are operational in cities including Beijing, Wuhu, Yichang, and Huainan.
China Gas, a company listed on the Hong Kong Stock Exchange with a market capitalisation of around $290 million, has been given monopoly operating rights in China’s gas sector.
Around 60% of the company’s equity is with public and the balance is being held by China Gas and state-owned Sinopec. There will be fresh issue of shares to GAIL for a 10% equity in the company, Mr Hui said.
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