China is the world's second largest oil
market and is also the largest growth market for natural gas. The
demand in China for this clean and economically attractive fuel has far
exceeded all expectations, particularly for use in households,
factories and vehicles. China has large domestic reserves of
conventional gas but it has been only over the past decade that the
necessary field developments and pipeline infrastructure have been
installed to bring this gas to the major cities such as Beijing.
China is also beginning to import gas as shipped LNG (Liquefied Natural
Gas) and is planning to import piped gas from its neighbours.
However a vital future source will be the vast domestic reserves of
unconventional gas such as coal bed methane (CBM).
Fortune Oil's gas strategy is to create an independent integrated gas
company: developing our own resources of unconventional gas; sourcing
gas from other producers; distributing this gas through pipelines, LNG
or CNG; and then retailing this gas to end-users through our city gas
companies or CNG vehicle stations. We already have many necessary
pieces of the jigsaw in place, such as the largest CNG station in
Beijing and a coal bed methane block
in Shanxi Province. Currently there are
no private or foreign companies in China with a regionally integrated
Fortune Oil's investments in gas were initially through Fu Hua,
an 80% owned joint venture with the PetroChina affiliate which operates
the pipelines supplying Beijing. Gas from these trunk pipelines
is supplied by our spur pipelines or our CNG operations to our city gas
In Shanxi Province we have a joint venture with the provincial
government as a platform for collecting and marketing coal seam
gas. Shanxi has one of the world's largest sources of coal and
coal seam gas, including the coal bed methane block controlled by
Fortune Oil at Liulin. The government has a clear policy of
encouraging private and foreign investment in the extraction and proper
utilisation of gas from coal seams, particularly as there is increasing
emphasis on improving coal mine safety, utilising domestic clean energy
resources and protecting the environment.
Fortune Oil's gas business is held under the wholly owned Fortune Gas
Investment Holdings Limited ("Fortune Gas"). In November 2008
Wilmar International Limited, a major Singapore listed company,
invested US$36 million to acquire new shares in Fortune Gas
representing 15 per cent of the enlarged capital.