Xiangdong Piped Natural Gas Distribution Project -Pingxiang City

Xiangdong Industrial Park Project in Pingxiang City, Jiangxi Province

Project Overview

  • Operating company: Pingxiang Xinao Changfeng Natural Gas Co.,Ltd
  • Date of establishment: May 12, 2010
  • Registered capital: US$5.32 millionRMB$80 million, the total investment of the first phase of the project is RMB $33.18 million
  • Main Business: Construction of natural gas pipeline and transmission of natural gas in the Xiangdong district of Pingxiang city
  • Franchise: 50 years
  • Operating conditions: At present, the medium-pressure pipeline has been laid more than 70km , and one gate station, LNG storage and CNG regular station have been built (the designed gas capacity is 300,000 m3/year) and completed smoothly the ventilation and ignition on December29, 2012.

Operation right

In January2010, CF Energy company was authorized by the People’s Government of Xiangdong District,Pingxiang City,Jiangxi Province.The project subsidiary will have the franchise rights of the administrative area, new planning area and ceramic industry base of Xiangdong District, with a term of 50 years.

In March 2012, CF Energy accessed the approval of the Jiangxi Provincial Development and Reform Commission.The Xiangdong District Natural Gas Pipeline Network Project, which was undertaken byPingxiang Changfeng Gas Co., Ltd. (hereinafter referred to as the "Pingxiang Changfeng") officially started construction and operation.

Industrial gas users

Xiangdong is the Ganxi industrial town, whichhas been given the title of the "National Spark Technology Intensive Area","National Technological Progress Advanced District" and "The Capital of Chinese Industrial Ceramics". Xiangdong,the largest production base for industrial ceramics, has more than 100 industrial ceramics production enterprises.The production of chemical packing and grinding ceramic balls occupied more than 60% of the national market, which exported to 60 countries and regions, includingEurope, the United States, Southeast Asia. Fuel energy is indispensable in the process of ceramic production,providing a superb potential market for Pingxiang Changfeng.

The Network Construction of Industrial Park in the Xiangdong District

Pingxiang Changfeng company has laid pipe network in ceramic industry base since 2011. As of August 2016, CF Energy company has completed the construction of all main pipe networks in the ceramic industry base and construction of main station network from the gate station to Xiangdong district, the large parts of pipe network in Xiangdong district, and completed the construction of main pipe network in the industry concentrating areas and the small towns for residents, such as Xiafu town, Laoguan town, Lashi town and so on. The length of medium-pressure gas pipeline network exceeds 50km. The range of users includes 57 industrial users, 47 commercial and government canteen users, and more than 3,000 households. The scale of pipeline network and scope of users are now expanding.

The condition of gas source

The company was approved with an annual indicator of 50 million m3(1.765 billion ft3). On December16, 2014, CF Energy signed a natural gas purchase and sale agreement (hereinafter referred to as the "agreement") with the China National Petroleum Corporation (hereinafter referred to as the "CNPC"). The agreement refers to the purchase and sale of pipeline natural gas in 2015 as well as the related natural gas index of Xiangdong project approved by the Energy Bureau of Jiangxi province in2011. In accordance with the terms of the agreement, CNPC agreed to provide 50million m3 qualified gas index to CF Energy in 2015. Every five years thereafter, CF Energy and CNPC will jointly negotiate the annual volume of CF Energy at the end of June of previous year in five years expired. At the same time, according to the agreement, CF Energy needs to sign a transportation contract with Jiangxi Natural Gas Investment Company Limited (herein after referred to as the "carrier"), that is the official natural gas receiving terminal station designated by Jiangxi Provincial Government. The carrier is responsible for the transportation of natural gas purchased by CF Energy from the engineering pipes of CNPC West-East Gas Pipeline Project second line to CF Energy gate station. At the same time, the carrier is responsible for the construction of the transportation branch pipeline, about 13km long. After the branch pipelines were completed, the agreement will greatly reduce the cost of purchasing expensive CNG in order to supply the natural gas for Xiangdong areas.

Operation Income

The operating income of Xiangdong project is mainly comprised of the gas installation and the gas sales. The price of gas sales is determined by the local government. The revenue of gas sales comes from industrial, commercial and residential users andthe rates varies. The residential users refer to the users who lived in the urban uptown, including apartment buildings and self-built housing users. Non-residential users are including but not limited to the ceramic manufacturers within the industrial park, guesthouses, hotels, hospitals, schools and government canteens etc.

According to the government price regulation, the gas sales price of residential users is RMB$3.3/m3 while the gas sales price for non-residential users is RMB$3.8/m3. The company has sold natural gas to more than 100 industrial and commercial users by the end of December 2017. According to the government's price guide, the amount of gas consumption of residential users is fixed basically, and the cost is also relatively stable, while non-residential users pay for the gas according to daily consumption.

The gas installation fee refers to the one-time advance payment that the company charges customers for connecting the gas supply network and gas facilities from the gas pipeline network to customers in the process of providing gas to customers. The payment has different charges depending on the types of customer.

Growth Highlights

The Xiangdong district is one of the two administrative regions of Pingxiang city. Pingxiang city is located in the west of Jiangxi province, 80kmaway from southeast of Changsha city, Hunan province. Pingxiang Ceramic Industry Base has a planned area of 55 km2 and 62 enterprises have settled in, achieving a revenue of more than RMB$15 billion from its main business. At the same time, the scientific research platform of “Five Centers and One Supermarket” such as Industrial Ceramics National Testing Center, Technical Service Center, R&D Center, Education and Training Center, Product Exhibition Center and Industry Talent Supermarket has been built in the base, and the dedicated lines for railway transportation have been built by the provincial government. It strives to build the industrial ceramics production base which is the world’s largest and the strongest ceramic production base in China.

In order to protect the environment and improve the quality of ceramic products, the local government in Pingxiang advocates strongly production enterprises to use natural gas as the fuel for production. At present, coal, coke oven gas and hydraulic gas which used for ceramic production in Pingxiang areas had caused serious air pollution to the environment. The natural gas is a clean energy source. It is a fuel with high calorific value, unique and high-quality. which can improve product quality and createunique product values.

According to the survey, many manufacturers in the park will use the natural gas directly as the fuel for production.

Xiangdong Pipeline Construction