China & USA

China Natural Gas comments on recent NDRC announcement

Vehicle conversions rising

US based China Natural Gas, Inc. a major provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural gas for industrial, commercial and residential use in Xi'an, China, has issued statements on a recent price adjustment on retail gasoline and diesel prices announced by the China's National Development and Reform Commission ("NDRC") in June 2008. According to NDRC's announcement, China's gasoline and diesel retail prices were increased by RMB 1,000 yuan ($US146) per tonne, a 16 percent and 18 percent increase, respectively. The price of natural gas and liquefied petroleum gas was left unchanged.

Mr. Qinan Ji, CEO and Chairman of the Board of China Natural Gas, stated, "We believe the most recent upward adjustment of retail gasoline and diesel prices will benefit our company in the long term. As a result of the price increases, more vehicle owners are converting their cars as they realize cost savings associated with utilizing natural gas instead of gasoline. The cost for converting a regular sedan is approximately RMB 6,000 yuan ($US876), but vehicle owners can save approximately 60% of the fuel cost by using CNG as an alternative to gasoline. Month to date, our auto body shop converted an average of 25 cars per day in July, this is up substantially from an average of 7 to 9 cars per day in the first quarter and second quarters of 2008."

Mr. Ji continued, "In the second quarter of 2008, we converted approximately 700 cars, up substantially from 500 cars in the first quarter of 2008. We believe this trend toward conversion will continue to be strong and, despite having a slightly lower gross margin than our filling station business, the conversion business will drive overall demand for natural gas sales in the future."