Zhongjiaeng Gas Tech works to fill up on LNG

China

TOGY talks to Hao Rao, chairman of Beijing Zhongjiaeng Gas Technology. In May 2015, the company entered the liquefied natural gas (LNG) market. Beijing Zhongjiaeng Gas Tech now caters to 32 cities in China, and aims to create subsidiaries in the east and north of the country, with its eye on international partnerships.

Beijing Zhongjiaeng Gas Technology provides CNG and LNG transportation services and equipment as well as services associated with pipeline engineering and the construction of filling stations. In August 2016, the company began strategic collaborations with the China National Petroleum Corporation (CNPC), Sinopec, the China National Offshore Oil Corporation (CNOOC) and ENN Group. Beijing Zhongjiaeng Gas Technology works with CNOOC and ENN Group to promote LNG, however the operators profits are derived from LNG purchases from the terminal.

• On pollution in China: “Pollution in China is very bad, and the government wants to replace CNG with a cleaner resource. LNG is a very wise move. Our business currently comprises 95% LNG and 5% CNG. I don’t want to increase the share of CNG, we will just focus on LNG. The weight and transport of LNG and CNG is very different. One truck can hold five times the amount of LNG than that of CNG, so the logistics are much cheaper for LNG.”

• On CNG fueling stations in China: “Only a few cars and some trucks in China use LNG fuel. More are using CNG, and the majority are still using petrol. ENN Group has [petrol] fueling stations all over China. We are building our own fueling station, because this market is not very easy. The cars that use gas are not very stable and we can see that competition is fierce. Many LNG fueling stations already exist. Building a fueling station requires a lot of financial investment, and the market is not easy to break into.”

Besides touching on these topics, TOGY talked at length to Hao Rao about the company’s ongoing developments in China and the growing adoption of LNG as a source of fuel in China. Beijing Zhongjiaeng Gas Tech is an LNG trading company catering to the Chinese market. The company was established in January 2015 as a compressed natural gas (CNG) trading company. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Hao Rao underneath.

What have been your primary projects in 2015-2016?
In March 2016, we debuted four new sales areas in north, east, central and northwest China. We have already started working on a terminal in these major areas. All I need to do is sign the contract. In August 2016, we began strategic collaborations with the China National Petroleum Corporation (CNPC), Sinopec, the China National Offshore Oil Corporation (CNOOC) and ENN Group.
We work with CNOOC and ENN Group to promote LNG, but our profit comes from the clients buying LNG from the terminal. We have major clients who are in the petrochemicals industry in Henan Province. There, we can achieve 50-60 cars. Within petrochemicals, we work with the chemical manufactures. Most of them are in Hunan Province and are typically privately owned companies, but we collaborate with the state-owned Beijing Fuel Gas Company, China Natural Gas Group and some companies in Hong Kong. We also cater to clients in steel, aluminium, textiles, food, electricity and asphalt manufacturing. Our LNG business is more or less evenly distributed across these industries.

Can you give an assessment regarding the development China’s LNG market?
The government is pushing policy to replace traditional sources of energy with LNG. This has helped us develop very quickly and gain contracts easily. China’s high demand for LNG necessitates that the country import from the international market. CNPC and CNOOC currently import LNG, and depending on their need, they may require building more LNG terminals to receive it. Right now they don’t have enough terminals; it is already very full in this market. They also need trucks for transport and storage. Depending on how much LNG the client demands, we will buy more from international markets.
We focus on the midstream and downstream. We purchase our LNG from other countries or factories as we do not have our own LNG factory yet. We become agents of other companies. Our LNG trade covers 11 provinces and 32 cities, and we are expanding. All of our contracts are long term, at 3-30 years. By the end of the first season of 2017 we want to reach 100 cars per day. Each car has a 20-tonne capacity for [transporting] LNG.

How will the increase in CNG-powered vehicles affect LNG adoption?
Pollution in China is very bad, and the government wants to replace CNG with a cleaner resource. LNG is a very wise move. Our business currently comprises 95% LNG and 5% CNG. I don’t want to increase the share of CNG, we will just focus on LNG. The weight and transport of LNG and CNG is very different. One truck can hold five times the amount of LNG than that of CNG, so the logistics are much cheaper for LNG.

What is your strategy for growth alongside China’s LNG market?
We have a strategic collaboration with ENN Group. We want to build a model relationship with the other companies as well in order to buy a company, share some holdings and bring local companies into our business. If we have partners in the Chinese market, we can gain more clients. Our focus is on the domestic market, because Chinese energy and energy infrastructure is lacking. We should import LNG rather than export to international markets.
Only a few cars and some trucks in China use LNG fuel. More are using CNG, and the majority are still using petrol. ENN Group has [petrol] fueling stations all over China. We are building our own fueling station, because this market is not very easy. The cars that use gas are not very stable and we can see that competition is fierce. Many LNG fueling stations already exist. Building a fueling station requires a lot of financial investment, and the market is not easy to break into.
We are also thinking about building an integrated LNG supply chain as we find more clients. We can become more active upstream and at the receiving terminal.

For more information on Beijing Zhongjiaeng Gas Technology in China, such as works being conducted to switch China to LNG, see our business intelligence platform, TOGYiN.
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