Gas Distribution Business in Sanya City, Hainan Province

Project Overview

Operating company: Sanya Changfeng Ocean Natural Gas Co.,Ltd.

Date of establishment: January 19, 1995

Registered capital: US$10.48112million

Franchise: 30 years

Main Business: the construction, operation and management of civil natural gas transmission and distribution network project in Sanya. 

Qualification of Company: The business license for city gas, the three qualifications of municipal public works construction general contracting, the design qualification of municipal industry (urban gas engineering) with professional class C, the design qualification of pressure pipeline GB1 and GC2, the company has passed ISO9001 quality management system and OHSAS18001 occupation health and safety management system certification.

The honor of Company: the Director Unit of Urban Gas Association in China, the CCBC gold members, the Executive Director Unit of Safety Production Association in Hainan province, the Vice-Chairman Unit of Gas Association in Hainan province, the Executive Vice-President Unit of the Zhanjiang Chamber of Commerce in Hainan province, the Vice-President Unit of Industrial Economy Union in Hainan province, the Vice-president Unit of Foreign Economic Development Association in Hainan province, the honorary President Unit of Guangdong Wuchuan Chamber of Commerce in Haikou city, the Executive Vice-president Unit of Guangdong chamber of Commerce in Hainan province, the Survey and Design Association Member Units in Hainan province.

The present situation of Sanya source: the short term: it is centered on the Ya 13-1 piped natural gas, taking the Yangpu LNG reservoir depot and the Macun LNG reservoir depot as a supplemental gas source for emergency, peak shaving and so on. The long term: according to the situation of Huandao natural gas pipeline network construction in Hainan province, will take the Ya13-1,13-2, Ledong 15-1 piped natural gas and Huandao natural gas pipeline network as the main source of gas supply in Sanya city, and take the Yangpu LNG reservoir depot and the Macun LNG reservoir depot as the supplemental gas source for emergency, peak shaving and so on.

Exclusive Franchise

      Changfeng Energy Company has 30-year (2007 to 2037) exclusive franchise of  gas selling for the commercial and residential users in Sanya city and its surrounding areas. Changfeng is the sole natural gas operator in Sanya region which is responsible for the daily gas supply for residents, public facilities, catering hotel and industries within 1919.58 km² in Sanya administrative areas.

Stable Operating Income

       Changfeng Company's continuous revenue comes from more than 180,000 customers and a well-established natural gas pipeline network in Sanya.

Huge Growth Potential

        According to the statistics of Sanya city in 2016, there are a total of 754,300 permanent residents in Sanya. In 2009, the central government formulated the policy of turning Hainan into an international tourism destination in 2020, with the intention of developing the economy of Hainan province. The construction is currently in progress and will be finished in 2020.

Business Overview

 The Sanya Civil Natural Gas Transmission Project and distribution pipeline network have started on September 29, 1997.The long-distance trunk line was completed in 2002 and ventilated and put into trial operation in June 2003. At present, we have completed a first station, a gate station, a Haitang Bay natural gas storage and distribution station (the first gas source station in Sanya city), eight regulator stations, two CNG stations, two LNG stations, the design annual maximum supply capacity is 537 million cubic meters. In 2010, the Haitang Bay Natural Gas Storage and distribution station (the first gas source station in Sanya) was completed and put into trial operation, ending the history of the single gas source supply in Sanya city. The Haitang Bay Natural Gas Pipeline Network Project is another major gas engineering project after the construction of company’s long-distance transmission line and urban pipe network. Until now, the total mileage of the company’s gas pipeline network has exceeded more than 1,000km, the coverage rate of city gas pipeline network is 100%, and the development of users is increasing by 10% per year. At present, there are about 1,000 restaurants and hotels in Sanya, and 300,000 households signing up for gas. The gasification rate of new district users in Sanya city is close to 100% and the gasification rate of hotel users in the main city was close to 80%. The gasification rate of residential users exceeds 75%, and the daily average gas supply of pipeline natural gas pipeline has reached more than 150,000m³.

Gas Source Status 

At present, the main gas source of Changfeng company comes from the average annual average of 24 million square meters. It is a fixed indicator gas in Sanya city from 2006 to 2015. The price is favorable. The gas source stems from Ya13-1 gas field of China National Offshore Oil Corporation (CNOOC) where about 100 kilometers away from the coast of South China. The gate station connected directly connects the natural gas processing station of the China National Offshore Oil Corporation's Ya13-1 gas field where about 100 kilometers away from South China coast.

    Since 2009, urban construction and coastal tourism have been in the ascendant in Sanya. In order to meet the growing demand for gas, Changfeng has signed a liquid natural gas (LNG) and compressed natural gas (CNG) agreement based on market supply and pricing.

On December 16, 2014, Changfeng company signed a natural gas purchase and sale agreement with CNPC. At the same time, Changfeng worked closely with local municipal government to seek solutions for the negative effects caused by the rapid expansion of urban tourism in Sanya, the rapid development of coastal tourism, the shortage of natural gas and the financial pressure on high-priced gas purchases. The practical measures to solve the problem include increasing the gas prices for industrial and commercial users, government subsidies, as well as additional indicators of successful trials. The gas-to-electricity project has been completed in 2014. According to the agreement, the company will provide 5 million square meters of exchange gas source in 2015.

Operating Income 

The operating revenue of Sanya project is mainly comprised of the gas installation and the gas sales. The price of gas sales is prescribed by the local government. The revenue of gas sales comes from the industrial users and commercial users and the rates vary. The residential users refer to the users who lived in the urban uptown, including apartment buildings and condominium. The commercial users refer to the users who within the hotels and restaurants. According to the government price regulation, the gas sales price of residential users is RMB2.60/m³ (about CAD$0.5/m³); the gas sales price of commercial users is RMB4.70/m³ (about CAD$0.9/m³). Such pricing policy is effective from 1^st May, 2017.        

The gas installation fee refers to the one-time advance payment that the company charges to customers for the gas supply from the company's pipe network to customers. The amount varies depending on the type of customers.According to the government's price guide, the charge of residential users is fixed basically, while the installation fee of commercial customers is based on the maximum daily gas consumption.

Growth Highlight

Sanya city, located in the southernmost of China, is the only tropical marine resort in China, and enjoys the reputation of "Oriental Hawaii". In 2009, the Chinese government proposed the plan of building Hainan into an international tourism destination by 2020. Therefore, large scale of hotels, resorts and uptowns are  built in Sanya city, especially the Haitang Bay. 

Haitang Bay is one of the five major bays in Sanya city. Its construction belongs to Hainan Provincial Government’s flagship project . The project has a construction area of approximately 98.7 km2, including a coastline of approximately 24km. According to the planning of local government, 25 luxury hotels will be completed by 2020. At present, The hotels and resorts currently in operation include 4 world-class hotels such as Hilton, Kempinski and Sheraton, and a rehabilitation resort center, all of which are gas customers of Changfeng company. In addition, the Shangri-La hotel is also under construction.

Changfeng company hopes that company’s operating income will achieve substantial growth as more hotels are built in Haitang Bay which in turn bring more gas customers using company's pipe network.