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Corporate Presentation August 2010

Corporate Presentation August 2010. Table of Contents. About China Gas. China Gas Overview. Principal Business Segments

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Corporate Presentation August 2010

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  1. Corporate PresentationAugust 2010

  2. Table of Contents

  3. About China Gas

  4. China Gas Overview • Principal Business Segments • Natural Gas Services Operator: Engages in the investment, operation and management of city gas pipeline infrastructure, distribution of natural gas to residential, industrial and commercial users, and construction and operation of natural gas refilling stations • Business started in 2002 when China decided to construct the West-East Pipeline • Operates in 134 city concessions with 30-year monopolistic operating right each • Possesses a pipeline network of more than 31,943 km serving approximately 5.1 million household users and nearly 35,481 industrial and commercial users • LPG Supplier: The only vertically-integrated LPG operator in PRC • Entered into the LPG industry in September 2008 • Owns 11 LPG receiving terminals, 275,000 m3 of LPG storage capacity, upstream to downstream distribution network in PRC • Covering wholesale and retail LPG supply in Guangdong, Guangxi, Fujian, Zhejiang, Jiangsu and Anhui provinces.

  5. Strategic Partnerships Each of GAIL, Oman Oil, SK E&S and ADB has senior person on the board of China Gas, providing valuable insights and advice from the international and diversified perspectives Strategic shareholders have partnered and helped China Gas’ growth through the years Oman Fund (Nov 2007) Public SINOPEC (Dec 2004) Oman Oil (Jan 2006) Management & Founders (2002) SK E&S (June 2008) GAIL (May 2005) ADB (Oct 2006) 18.39% 6.24% 6.24% 4.46% 3.90% 48.92% 7.06% 4.81% CHINA GAS As of 30 June 2010

  6. Natural GasProject Development Process Bid & award Construction & development 12-18 months Operation 30 years China Gas has a strong track record of developing city gas projects on time and on budget • About 15 projects under review • Investment criteria include: • Project IRR > 15% • Industrial demand • Natural gas accessibility Revenue: Gas connection fees Projects under development 2007: 20 projects 2008: 18 projects 2009: 47 projects 2010: 35 projects Revenue: Sales of piped gas Projects in operation 2007: 37 sites 2008: 50 sites 2009: 63 sites 2010: 99 sites

  7. Natural GasCurrent Project Locations Hebei Cangzhou, Cangzhou Economic Development Zone, Nanpi, Qinghe, Leting, Xinle, Gaocheng, Pingshan, Feng Nan, Neiqiu, Wangdu, Nanbao, Bohai New Area, Hebei Pipeline Heilongjiang Harbin, Jiamusi, Shuangcheng, Mudanjiang, Jiagedaqi Henan 11 city gas concessions Heilongjiang Liaoning Dalian, Fushun, Jinzhou, Sujiatun(Shenyang), Jinzhou D. Zone, Liaoyang, Gaizhou, Zhuanghe, Linghai, Pulandian Jilin Inner Mongolia Hohhot, Wushenqi, Wushenqi Pipeline, Changmeng Pipeline, Baotou, 4 counties, Etoke Banner, Etuokeqi Liaoning Tianjin Tianjin Pipeline Inner Mongolia Gansu Beijing Xinjiang Tianjin Shandong Dezhou, Qingdao Hebei Ningxia Zhongwei Ningxia Shandong Shanxi Qinghai Jiangsu Pizhou, Yangzhong, Nanjing (Jiang Bei, Pukou), Xuzhou (Jiawang), Xuzhou (Xinyi), Yangzhou Shaanxi Baoji, Qishan Xian, Yulin Henan Jiangsu Shaanxi Tibet Shanghai Anhui Hubei Hubei Yichang, Xiaogan, Hanchuan, Yingcheng, Yunmeng, Suizhou, Tianmen, Guangshui, Dangyang, Xiaogan Pipeline, Dangyang Pipeline, Huanggang-Daye pipeline Sichuan Zhejiang Chongqing Zhejiang Hangzhou (Xiaoshan), Shaoxing, Taizhou, Jinhua Jiangxi Hunan Fujian Guizhou Yunnan Fujian 29 city gas concessions Taiwan Guangdong Guangxi Chongqing Dianjiang E&P, Yubei District, Dingwang purification, Chongqing Pipeline Anhui Wuhu, Huainan, Shouxian, Suzhou, Wuhuxian, Nanling, Huoshan, Fengtai, Wuwei, Xiuningxian Hainan Hunan Yiyang, Yuanjiang, Youxian GuangdongMaoming, Conghua, Meizhou, Yunfu, Shanwei, Xinxingxian, Fengshunxian, Pingyuanxian Guangxi Yuling, Qinzhou, Liuzhou, Fongchenggang, Laibin, Baise, Nanning City, Nanning Dongmeng Development Zone, Bobai Jiangxi Nanchang (Wanliqu)

  8. Natural Gas Business

  9. Natural GasBusiness Model Natural gas fields City gate National or provincial pipelines Storage tanks(spherical or cylinder) Assets owned by the Group: Main pipelines Branch pipelines Pressure regulating boxes Switches Processing stations * Customers’ pipelines which are not owned by the Group are within the customers’ premises and are not highlighted in this diagram Industrial users* Residentialhouseholds* Car refueling station Commercial users*

  10. Natural GasRevenue Model and Pricing 2 main sources of revenue Gas connection: one-off payment mainly from residential users, less so from industrial and commercial users Sale of piped gas: recurring income at tariffs approved by the local governments END-USER TARIFF COMPONENTS Exploration Wellhead price Transportation Transmission tariffs Distribution Distribution cost + margin NDRC Approval Local Price Bureau Approval Natural gas business operates on a cost-plus pricing model

  11. Natural Gas Supply Growth • Growth made possible by: • Additional gas supply from PetroChina as a result of the cooperation agreement • Commissioning of new gas fields • Xinjiang Province • Inner Mongolia • Sichuan Province • Commissioning of new national pipelines • Sichuan – East Pipeline • West – East Pipeline II • Import of piped gas from Central Asia, Russia and Myanmar • Completion of additional LNG terminals China Natural Gas Supply Projection Billion m3 Source: NDRC

  12. Peer Group Analysis Sales Revenue Growth FY2009/2010 Number of Gas Projects Source: individual companies’ annual reports Source: individual companies’ annual reports

  13. Liquefied Petroleum Gas (LPG) Business

  14. LPG Business China Gas is the largest and only vertically integrated LPG supplier in the PRC covering retail and wholesale Our LPG business covers: Upstream: Direct supply from refineries of PetroChina and Sinopec; also import from the Middle East; Midstream: 11 receiving terminals, 275,000 m3 LPG storage facilities, fleets of vessels and trucks, and distribution logistics in Guangdong, Guangxi, Fujian, Zhejiang, Anhui and Jiangsu; Downstream: Direct retail of bottled LPG to households. Heilongjiang Jilin Xinjiang Liaoning Inner Mongolia Gansu Beijing Tianjin Hebei Ningxia Shandong Shanxi Qinghai Henan Jiangsu Shaanxi Tibet Shanghai Anhui Hubei Sichuan Zhejiang Chongqing Jiangxi Hunan Guizhou Fujian Yunnan Taiwan Guangdong Guangxi Hainan LPG receiving terminals and storage facilities

  15. LPGBusiness Model Assets owned by the Group LPG vessels LPG trucks Trucks sending bottled LPG Class 1 Station Class 2 Station Class 3 Station Oil Refinery Import/ Domestic Supply Bottling Station LPG Receiving Terminal City gas companies Industrial users Domestic supply Storage Facilities Commercial users Residential households

  16. Value Chain of LPG Supply 4-5% Oil Refinery Class 1 Station LPG Wholesaler Class 2 Station Bottled LPG Maker Class 3 Station Bottled LPG Retailers Gross Margin (%) 5-6% 6-7% 10-12% 2009 LPG gross margin for China Gas: 5.7% 2010 LPG gross margin for China Gas: 8.7% Source: Company data

  17. LPG Market Share and Margins Outlook LPG Market Share by volume LPG Gross Margin Expansion Source: Company data

  18. LPG Supply and Demand in China China LPG Demand by Sector China LPG Supply and Demand Source: Company data

  19. Operational Highlights FY2010

  20. Natural GasSales Volume (as at 31 Mar 2010) Total sales volume (million m3)

  21. Natural GasCustomer Breakdown (as at 31 Mar 2010) Natural gas sales volume (million m3) 21

  22. Natural GasCustomer Data (as at 31 Mar 2010) 22

  23. Natural GasOther Operational Data (as at 31 Mar 2010) Urban population covered and penetration rate Natural gas daily consumption (000 m3) Urban Population Covered (m) Penetration Rate

  24. Natural GasOther Operational Data(as at 31 Mar 2010) 24

  25. LPG Operational Data (as at 31 Mar 2010) * Only half year data as China Gas commenced LPG business in Sep.2008

  26. Financial Highlights FY2010

  27. Financial SummaryIncome Statement

  28. Financial SummaryBalance Sheet & Debt Position * of which HK$2,450,349 was Zhongyou Huadian LPG trade finance related facilities ** of which HK$2,255,659 was Zhongyou Huadian LPG trade finance related facilities

  29. FY2011-12 Outlook

  30. Natural Gas Pricing Reform Given residential gas sales is only 11.6% of total gas sales, the impact of the recent 24.9% wellhead natural gas price hike on 2010/2011 earnings should be immaterial • No impact on commercial & industrial gas sales:automatic 100% pass-through • represents 81.1% of users for China Gas • Low elasticity:retail price hike of only RMB0.23/m3 and we anticipate residential users can absorb with minimal impact on demand • On a macro-view, price hike will stimulate upstream domestic production and encourage LNG imports, further easing near-term shortage of supply Sensitivity Analysis(1) (1) Total revenue is based on FY2010 natural gas total volume, FY2010 total revenue and 100% automatic pass-through of RMB0.23/m3 of price hike for commercial and industrial gas sales

  31. FY2011-2012 Drivers Significant increase in upstream supply will lead to: Increase in penetration rate: To reach 43% by 2012 – enhanced connection fee income More industrial connections: More gas to connect industrial customers in backlog – further increase gas sale volume Faster CNG stations rollout: To reach at least 180 CNG stations in 50 cities by 2012 – improving overall operating margins of gas sale Completion of vertical integration of supply chain will lead to: Wider distribution network: To cover 9 provinces with wholesale and retail supply Increase in sale volume: To reach at least 2 million tons by 2012 Improved margins: To reach 15% gross margin and 5% net margin by 2012 Natural Gas LPG

  32. FY2011-2012 Guidance • Enhance organic growth of existing city gas and pipeline projects in terms of residential penetration, industrial connections and CNG station rollout • Continue upstream LPG integration with refineries Sinopec and CNPC • Active rollout of LPG downstream retail distribution network and CNG stations

  33. Disclaimer Statements in this presentation and handout that are not strictly historical are “forward-looking” statements. Forward-looking statements involve risks and uncertainties, including, but not limited to, continued acceptance of the Company’s product and services in the marketplace, competitive factors, new products and technology changes, the Company’s dependence upon third party suppliers and other risks detailed from time to time in the presentation, handout and other related documents. China Gas is not responsible for the accuracy and completeness of the contents of such presentations and/or other documents. The materials and information in the presentations and other documents are for informational purposes only, and are not an offer or solicitation for the purchase or sale of any securities or financial instruments or to provide any investment service or investment advice.

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