China gas targets 20% growth as lower prices boost demand

HONG KONG (Bloomberg) -- China Gas Holdings Ltd. expects natural gas sales to grow 20% in the current fiscal year as lower prices and the country’s push to replace coal with cleaner fuels spur consumption.

The fuel distributor, which runs most city gas projects in China, plans to sell 12 Bcm of natural gas in the year ending March, up from 10 Bcm in the previous period, executive Chairman Liu Minghui said in a briefing in Hong Kong Tuesday. Chinese authorities in November reduced prices for the fuel in an effort to encourage usage.

“China’s gas demand is always there, but relatively high prices last year made it unaffordable for many industrial users,” Liu said. “Because of the price cuts in November, consumption is back and we are confident we can achieve the 20% sales growth in the year ahead.”

China’s gas consumption growth slowed to 3% last year as the fuel’s competitive edge was undermined by cheap oil and while government price cuts lagged a decline in the fuel’s value on the open market, according to Bloomberg Intelligence. The reductions in November have helped push the country’s average gas demand in the first five-months of this year 15% higher, according to BI calculations.

China Gas also aims to expand liquefied petroleum gas sales to 3.8 MMt in the year ending March, from 3.2 MMt, and liquefied natural gas sales to 800,000 tons from 300,000 tons. The company’s sales growth in the April-to-June period was “better than the national average,” Liu said.

The company’s annual profit dropped 32.6% to 2.27 billion yuan, after posting a 1.4 billion yuan impairment charge caused mostly by foreign exchange losses, according to a statement filed with the Hong Kong stock exchange. China Gas lowered its U.S. dollar debt to 7% by March 31 from as high as 83% two years ago to avoid future currency risks, V.P Zhu Weiwei said at the briefing.