GAIL to buy 10% China Gas stake

State-run gas transporter GAIL (India) Ltd will take a 10 per cent stake in China Gas Holdings Ltd.

"We have signed a preliminary agreement to buy 10 per cent of China Gas Holdings Ltd," a company official said without giving financial details.

GAIL will take up to 10 per cent of the Hong Kong-listed firm through a share subscription and has agreed not to sell the shares for two years.

China Gas and GAIL will form a 50:50 joint venture to invest in natural gas projects in mainland China, such as urban gas networks and long-distance pipelines. The venture will also sell and distribute liquefied petroleum gas.

China, whose major cities are often shrouded by smog, is keen to promote the use of cleaner burning gas and reduce its reliance on coal.

The MoU with GAIL follows China Gas selling 10 per cent stake each to Korea Gas Corp. (Kogas), South Korea's dominant gas supplier, and City Gas Pte. Ltd., the gas distributor run by Singapore's state-owned investment company Temasek Holdings.

China, the world's second-largest oil consumer, is trying to raise natural gas use from 3 per cent to 8 per cent of its mix by 2010 amid tight energy supplies.

China Gas supplies gas to more than 200,000 households and 2,000 industrial and commercial users in China, where it has more than 50 natural gas projects. The company was granted a 30-year licence last month to run piped gas business in Nanjing city.