China’s city gas industry has developed rapidly in the past years: for 2005, the popularity rate reached 92%. The output and storage capacity of natural gas was up to 50-60 billion m3 and 8.23 million m3 respectively, and the consumption of natural gas and LPG achieved 17.54 billion m3 and 13.673 million tons separately.

The year 2005 saw the overall opening up and fast development of China’s city gas industry. The contracted foreign capital of gas production and supply industry reached USD 370 million, the amount of which actually used was USD 220 million. Currently, foreign owned or Hong Kong based gas companies such as Shell and Towngas have entered into China’s city gas industry by joint-ventures or merger & acquisition, and they even planed to enlarge the investment for entry into downstream sub-branch markets. Meanwhile, being short of energy, some provinces and municipalities around Pearl River Delta and Yangtze River Delta have began to construct LNG pipelines so as to relieve the shortage crisis of natural gas and oil. Three pipelines of Sino-Russia, Seninglan, and Shaanjing have been put into production in 2005, and the other two pipelines of Shaanjing II and Zhongwu will soon be constructed, which would form a gas transmission network to guarantee the gas supply to more than 100 cities along the pipelines.

The development trends of China’s city gas industry in the forthcoming twenty years are as follows: the manufactured gas will be eliminated gradually, while the natural gas will develop rapidly, and the LPG, as the complementary energy for natural gas, will develop steadily. The operation of West-east Gas Transmission Project will greatly influence the prices, supply and demand of the other energies, and Chinas energy market structure will also be changed totally.

With the increasing proportion of natural gas in China, the city gas market looks promising. In the new run of public utility reform, city gas equipment construction hungers for a large number of funds, so great chances are now available for foreign capital. The State Development and Reform Commission definitely claimed that, a relatively higher price is permitted in city gas and priority shall be given in supply, which makes city gas quite attractive for investors.

As for city gas investment, direct investment on manufactured gas production should be reduced and there should be increased investment from the transition of manufactured gas facilities to natural gas supply facilities; increased investment in production, storage and sales of LPG in the short and medium term, and particularly, further investment on imported LPG and gas storage tanks. The investment in the natural gas field is crucial to the development of China’s city gas industry. With great investment, the prospects of the natural gas industry will be brilliant in relevant chains of production, transmission, development and marketing.

In March of 2002, State Development and Reform Commission, former National Economy and Trade Commission and former Ministry of Foreign Trade jointly issued the Catalogue for the Guidance of Foreign Investment Industries. China firstly listed the city pipe network as the open up industry, that is to say, the originally forbidden field of city pipes began to open for foreign investment. Major foreign investors now have access to gas distribution. The State Development and Reform Commission also welcomes foreign capital to natural gas exploration and development, as well as city natural gas terminal sales, natural gas for power generation, oil and gas infrastructure construction, and petrochemical industry, among which the upstream, midstream and downstream of natural gas industry are all opened to foreign capital. No restriction on investment proportion in city pipe network construction and wholly foreign-owned enterprises is permitted.