Green Dragon Gas, an independent CBM gas producer and distributor and seller of wholesale gas in China, has entered into a binding agreement to add 25 new vehicle refuelling stations in 7 districts in Henan Province. The acquisition cost is USD 15 million, with each station expected to cost a further USD 500,000 in construction related expenses.
The new facilities are in Xinxiang, Kaifeng, Anyang, Luoyang, Xuchang, Hebi (including Sanmenxia and Jiaozuo) and Zhoukou. These stations are in addition to the two existing refuelling stations already established and operating in Henan’s capital city, Zhengzhou and Jiyuan, thereby increasing Green Dragon Gas’s total retail network to 27 stations.
All stations are located within a 250km radius from the Company’s production facility in Shanxi province or the midstream operation in Zhengzhou; the locations were selected based on market demand, population and fleet transportation hubs. They have a combined population of 21.5 million people. Retail CNG gas selling prices are currently in the region of USD 13 to USD 15 per Mcf.
Regional cities are beginning to mandate that taxis and mass transport convert to dual use – petrol and CNG, adding to the fast growing market.
The Company anticipates that operations will commence in 2011 for the new stations, with an initial sales capacity of 2 BCF (70 million cubic meters) by the end of the first year of operations. This is expected to rise to 6 BCF (211 million cubic meters) annually thereafter, as all facilities/ stations come on line.
Gas, from the Company’s Shizhuang South (GSS) production block, will be distributed to these refuelling stations via the Company’s fleet of trucks. Green Dragon Gas’s technology and manufacturing division is expected to be the supplier of the dispensing and ancillary equipment for these stations.