China Gas, Sinopec agree strategic LPG framework deal

Hong Kong-listed LPG importer China Gas has agreed a strategic co-operation framework deal with state-controlled refiner Sinopec covering LPG and natural gas.

The companies are looking to combine Sinopec's natural gas and LPG supply presence, as well as its service station network, with China Gas' midstream and downstream distribution networks. The agreement covers deep processing, logistics and warehousing across the LPG industry's value chain, China Gas said.

The two firms plan to establish a national association of LPG importers, although it is unclear if this will be a bilateral or industrywide initiative. They also said they plan to push ahead with the formulation and implementation of a Chinese LPG import price index, but did not give details.

Argus last month launched the cfr Ningbo Index, to meet growing demand for a price that accurately represents conditions in the Chinese market. The index is based on trade for 46,000t propane and/or butane refrigerated cargoes into Ningbo port in east China.

The companies will also work to co-ordinate external procurement, while China Gas will allow Sinopec to use its terminal storage facilities to support Sinopec's onshore LPG operations.

China Gas is one of the largest LPG importers and distributors in China. It owns seven LPG receiving terminals with 300,000m³ of storage capacity, two very large gas carriers (VLGCs) and four inland waterway vessels. China Gas also owns 113 distribution projects and 1,100 LPG retail stores in 21 provinces.

Sinopec is China's largest refiner and second-largest oil and gas refiner by capacity, with other interests including coal, chemicals and new businesses.