Development and Opportunities in

Chinas Natural Gas Market

by Minghui Liu
Founder and President
China Gas Holdings Limited
Content

Part I Natural gas industry in China

Part II China Gas Holdings Limited

1. Chinas natural gas market: huge potential

Total energy consumption in China, 2013 Total energy consumption in US, 2013
Renewable energy: 2%
Renewable energy: 3%
Natural gas: 5%
(to be raised to over Hydropower: 3%
10% by 2020)

Nuclear power: 9%

Hydropower: 7%
Oil: 31%
Nuclear power:1%

Oil: 18% Coal: 22%

Coal: 67%
(to be lowered to less
than 62% by 2020)
Natural gas: 32%

* Source BP
3
2. Chinas natural gas market has been growing
explosively since 2000

Growth trend of Chinas natural gas consumption

Unit: 100 million cubic feet

65,658

6%
0 1 4: 1
2
2 000~
g
durin
GR
CA 37,948

27,322

17,650

8,649 9,531

2000 2002 2005 2008 2010 2014

* Source: The National Development and Reform Commission of the People's Republic of China (NDRC)
4
3. Natural gas infrastructure secures supply and pushes
application

Pipeline network length: 70,000km Number of population

Annual transmission capacity: 6 trillion cubic feet served with gas:
Number of LNG receiving terminal: 22 270 million
Receiving capacity: 40.8 million tons per year Penetration rate in cities and
towns served with gas: 37%
* Source CNPC Economics & Technology Research Institute 5
4. Increasing gas supply

Growth trend of natural gas supply in China

Unit:: 100 million cubic feet
Imported LNG Imported PNG Domestic gas

64,6
88
9,781

39,8 11,335
65
29,6
4,590
25 1,412
18,7 1,554
1,236
14
11,58 43,573
1,059
9,60 2 33,862
26,835
4 -
17,655
9,604 11,582

2000 2002 2005 2008 2010 2014

* Source: CNPC Economics & Technology Research Institute , The National Development and Reform Commission of
the People's Republic of China (NDRC) and National Bureau of Statistics 6
5. Supportive regulatory policies in China

2012 2013 2014

12th Five-Year Action Plan for Method of Evaluation

Plan for Natural Air Pollution of the Implementation
Gas Industry Prevention of Action Plan for Air
Development Pollution Prevention
Work Plan for
Energy Industry Notice of the State
to Strengthen Council on 2014-2015
Air Pollution Action Plan for
Natural Gas Prevention Developing Energy
Utilization Conservation and
Policy Emission Reduction

Action Plan for

Energy Development
Strategy (2014-2020)
7
6 Demand for natural gas rises sharply in the
cities.
Natural gas utilization in different sectors in China

100%
90%
36% 32% 30%
80%
70%
60% 18% 16% Industy fuel
50% Chemical industry
38% 15%
40% 20% Power generation
30% City gas
20% 14% 39%
30%
10%
12%
0%
2000 2010 2014

* Source CNPC Economics & Technology Research Institute

8
7 Gas use in transportation sector is booming.

Trend of growth in the number of CNG station in China

Natural gas in the transportation
Unit: 100 million cubic feet
4,000
3,500 3500 35,000
3,000
2,500 30,790
2,000 30,000 : 9%
1,500
0 30
1,000
4-2
1 24,011
20
500 25,000
- g
2010 2011 2012 2013 2014 rin
du
20,000
G R
Trend of growth in the number of LNG station in China CA 15,713
15,000
3,000
2,500 2500 10,000 9,181
7,945
2,000
1,500
5,000
1,000
500
- -
2010 2011 2012 2013 2014 2014 2015 2020 2025 2030

*Source ICIS and the Research Team of the Development Research Center of the State Council concerning
the way of and countermeasures for increasing natural gas shares during the 13th Five9Year Plan period
8. Natural gas industry in China will be marketized
gradually.

Current situation Trend

Monopolized by state- Break the

Upstream owned enterprises
monopoly
and import actively

Release open
Monopolized by state- policies for pipeline
Midstream owned enterprises network and
promote free trade

The government regulates Pricing mechanism

Downstream the gas prices and gas will be market-
allocation to each city. oriented.

10
9. Natural gas supply and demand will grow steadily in China.

Outlook and prospects for natural gas supply in China

Outlook and prospects for natural gas demand in China
(Unit 100 million cubic feet)
(Unit 100 million cubic feet)
Domestic gas Imported PNG
127,080 Imported LNG
141,240

21,186
81,190
24,717
64,617
81,2
64,68 13
14,477
8
9,781 13,771
11,335 95,337

52,965
43,573

2014 2015 2020 2014 2015 2020

CAGR during 2014-2020: over 12%

* Source The National Development and Reform Commission of the People's Republic of11China (NDRC)
Content

Part I Natural gas industry in China

Part II China Gas Holdings Limited

10. China Gas Holdings Limited

Established and listed on Hong Kong mainboard in 2002

Mainly engaged in city gas distribution business: natural gas
and LPG
Chinas largest comprehensive seller of natural gas and LPG
Has nearly 100 million gas users
Has nearly 40,000 employees

Natural gas business

Natural gas and LPG business

13
11. The number of cities owned by China Gas

The number of cities owned

g
urin 237
d
b er
m
e nu : 30
h
i n t -2013
th 0 179
row 201
G 160
148
123
110

68
50 57
43
21

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

* Source Annual report of China Gas Holdings Limited

14
12. The number of gas refilling stations

The number of gas refilling stations

ring 353
u
erd
umb
n 3
the 13: 8
n
th i 0-20
row 201
heg
T
170
133
105
91
49 60
24
4
2005 2006 2007 2008 2009 2010 2011 2012 2013

* Source Annual report of China Gas Holdings Limited

15
13. The number of gas users of China Gas

The number of gas users rs:

(Unit: 10,000 households)
us e
gas
r of lds
e
mb useh
o 1,031
nu o
t he on h
n i
t h i mill 844
ow 4 1
Gr 1.
719
608
479
375

225
135
81
27 41

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

* Source Annual report of China Gas Holdings Limited

16
14. Natural gas sales volume achieved by China Gas

Natural gas sales(Unit:

volume
100 million cubic feet) 21%

013 2,825
-2
20 10
rin
g 2,472
du
GR
CA 2,048

1,589
1,271

752
388
62 126
14 13
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

* Source Annual report of China Gas Holdings Limited

17
15. LPG sales volume achieved by China Gas

LPG sales volume (Unit: 10,000 tons)

2 1%
3
0 -201 176
2 01
u r in g
R d
CAG

94 98
89 89

50

2008 2009 2010 2011 2012 2013

* Source Annual report of China Gas Holdings Limited
16. China Gass profit grows fast.

Net profit attributable to China Gas

(Unit: US$ 1 million)
%
29 774

GR
CA 710

%
60

R 332
C AG

228

113 123
81
10 13 20 26 15 13
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2016 2017
Target
* Source Annual report of China Gas Holdings Limited

19
17. China Gas gives a boost to environmental
protection in China.

In the past 12 years, China Gas cumulatively

sold:
1. 1.45 trillion cubic feet of natural gas; and
2. more than 8.2 million tons of LPG,

reducing:
- 1.5 million tons of sulfur dioxide
- 300,000 tons of nitrogen oxides
- 70 million tons of carbon dioxide

20
18. Business development strategy of China Gas CGH
Upstream business

Coal bed methane

Power generation
Receiving
terminal
Having low Pipeline construction LNG trading
relevance
Heating
with main
business CHP energy
E-business City gas
(Natural gas and
Gas appliance
LPG)
Gas refilling station

Downstream business
21
19. Target set for 2022 by China Gas

Future 2022

25%
v er
o Chinas best integrated
Present 2014 R
AG upstream & downstream
C
gas operator and
Chinas largest service provider
downstream gas
operator and
service provider
Outlook of China Gas performance
City
City gas
gas sales
sales volume:
volume:
China Gas performance
1.7
1.7 trillion
trillion cubic
2020
cubic 4290
feet
feet
City
City gas
gas sales
sales volume:
volume: m
LPG
LPG sales
sales volume:
volume:
317.8
317.8 billion
billion cubic
cubic feet
feet 88 million
million tons
tons
LPG 2020
LPG sales
sales 4290
volume:
volume:
m Number
Number of of gas
gas users:
users:
2.48
2.48 million
million tons
tons 30
30 million
million households
households
Number
Number of of gas
gas users:
users:
20
20 million
million households
households
22
Conclusion

Lets make progress together

!