OREANDA-NEWS. April 01, 2011. Fortune Oil (LON:FTO), the Hong Kong based group that invests in Chinese oil and gas supply and infrastructure projects, has agreed a deal that should boost the amount of gas it supplies in Liaoning Province. The company is set to acquire a 51% stake in Liaoning Jingrun Natural Gas Ltd, which owns a 30 year concession to build and operate a spur pipeline supplying natural gas to serve the ceramics industrial park in the county of Jianping. The high energy requirements of the ceramics industry means that natural gas consumption is expected to reach 200 million cubic metres per year.

Fortune is paying an initial RMB10.55 million (?1 million) for the stake with a further payment of up to RMB7 million due depending on the sales performance over five years. It said that Liaoning Jingrun Natural Gas has forged a strong partnership with the Liaoning Provincial government, which would lead to other concessions being granted to supply natural gas. The Fortune Oil share price opened higher at 12.14p on the news but had fallen back to 11.5p by mid-morning.

The new branch pipeline is expected to be completed in 2012 and reach its 200 million cubic metre capacity in 2013. The company said it had secured contracts for the supply of up to 200 million cubic meters of natural gas with China National Petroleum Corporation. Additional funding required by Liaoning Jingrun Natural Gas will be obtained via local banks or from Fortune Oil through shareholder loans. In the 12 months to December 2009, Fortune’s gas sales topped 482 million cubic metres and in the six months to June 2010 gas sales had risen to 298 million cubic metres. Figures for the whole of 2010 are expected in April.

Mr Qian Benyuan, the chairman of Fortune Oil, said: “We are delighted to add to our portfolio of natural gas businesses in Liaoning Province through this 51% acquisition of the spur pipeline to supply the ceramics industry. This is a long term concession that will secure customers with natural gas and reduce the use of more polluting energy sources.”

The acquisition is the latest move by Fortune to bolster its gas supply business in Liaoning Province. In February it entered into a joint venture agreement to supply liquefied natural gas (LNG) to up to 6,000 public transit buses exclusively using LNG stations operated by Fortune Liaoning. Fortune has been active in China for 17 years and its strategy is concentrated on building an integrated natural gas business together with oil import and processing facilities. It is currently working on developing its own gas supply from the Liulin coalbed methane project in Shanxi Province. It also runs pipelines, China’s first LNG production plant and operates the largest compressed natural gas (CNG) station in Beijing.

According to Fortune, China’s ambitions to grow its gas economy are forecast to see current consumption of 4% (93 billion cubic metres (bcm)) of the total energy mix grow to 10%, or 280 bcm to 300 bcm, by 2020.