Falling margin fails to hold back ENN Energy's expansion plans

ENN Energy, one of the mainland's largest city piped-gas distributors, has planned further expansion of its vehicular natural-gas refilling station network to capture business from a trend to switch to cleaner-burning fuel, despite a drop in profit margin due to higher gas prices.

The Hebei-based firm, controlled by mainland entrepreneur Wang Yusuo, aims to add 40 compressed and 100 liquefied natural gas stations this year. They totalled 448 in 2013, compared with the firm's objective set last year to have 500 by the end of next year.

Vehicular natural-gas refilling was a high-growth segment since domestic price controls meant natural gas was about 40 per cent cheaper than petrol for vehicle owners on a same-mileage basis, said ENN deputy chairman Cheung Yip-sang.

But with Beijing indicating last year that it aimed to gradually raise domestic natural gas prices so that they would reach 85 per cent of the import prices of alternative fuels such as liquefied petroleum gas and fuel oil by 2015, the price advantage of natural gas has been eroded.

This could halve the price differential to 20 per cent late next year, according to analysts' expectation that natural gas prices will be raised by 15 per cent this year and next to achieve Beijing's objective to promote conservation and higher domestic output.

The market would have difficulty stomaching another substantial rise this year, hampering the mainland's goal to tackle pollution by promoting gas use, Cheung warned.