China Oil & Gas Corporate Presentation

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Corporate PresentationAugust 2010


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Table of Contents

Section Page

1 About China Gas 3

2 Natural Gas Business 8

3 Liquefied Petroleum Gas Business 13

4 Operational Highlights FY2010 19

5 Financial Highlights FY2010 26

6 FY2011-12 Outlook 29


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About China Gas


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4

China Gas Overview

Principal Business Segments

1. Natural Gas Services Operator: Engages in the investment, operation and management of city gas pipelineinfrastructure, distribution of natural gas to residential, industrial and commercial users, and construction andoperation 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 andnearly 35,481 industrial and commercial users

2. 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 distributionnetwork in PRC

Covering wholesale and retail LPG supply in Guangdong, Guangxi, Fujian, Zhejiang, Jiangsu and Anhuiprovinces.


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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

CHINA GAS

Management

& Founders

(2002)

SINOPEC

(Dec 2004)

Oman Oil

(Jan 2006)

GAIL

(May 2005)

Oman Fund

(Nov 2007)

ADB

(Oct 2006)

Public

SK E&S

(June 2008)

18.39% 6.24% 7.06%6.24% 4.81%4.46% 3.90% 48.92%

As of 30 June 2010


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Natural GasProject Development Process

Bid & awardConstruction & development

12-18 months

Operation

30 years

About 15 projects

under review

Investment criteria

include:

1. Project IRR > 15%

2. Industrial demand

3. 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

China Gas has a strong track record of developing city gas projects on time and on budget


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Beijing

Shanghai

Heilongjiang

Jilin

Liaoning

Inner MongoliaXinjiang

Tibet

Qinghai

Gansu

Ningxia

Shaanxi

Shanxi

Henan

ShandongHebei

Jiangsu

Anhui

Zhejiang

Fujian

JiangxiHunan

Guangdong TaiwanGuangxi

Hainan

Yunnan

Guizhou

SichuanChongqing

Tianjin

Hubei

Natural GasCurrent Project Locations

Shaanxi Baoji, Qishan Xian, Yulin

Hebei Cangzhou, Cangzhou EconomicDevelopment Zone, Nanpi, Qinghe, Leting,

Xinle, Gaocheng, Pingshan, Feng Nan, Neiqiu,

Wangdu, Nanbao, Bohai New Area, Hebei

Pipeline

Hubei Yichang, Xiaogan, Hanchuan,Yingcheng, Yunmeng, Suizhou, Tianmen,

Guangshui, Dangyang, Xiaogan Pipeline,

Dangyang Pipeline, Huanggang-Daye pipeline

Hunan Yiyang, Yuanjiang, Youxian

Guangdong Maoming, Conghua,Meizhou, Yunfu, Shanwei, Xinxingxian,

Fengshunxian, Pingyuanxian

Guangxi Yuling, Qinzhou, Liuzhou,Fongchenggang, Laibin, Baise, Nanning City,

Nanning Dongmeng Development Zone, Bobai

Chongqing Dianjiang E&P, Yubei District,Dingwang purification, Chongqing Pipeline

Inner Mongolia Hohhot, Wushenqi,Wushenqi Pipeline, Changmeng Pipeline,

Baotou, 4 counties, Etoke Banner, Etuokeqi

Ningxia Zhongwei

Fujian 29 city gas concessions

Jiangsu Pizhou, Yangzhong, Nanjing(Jiang Bei, Pukou), Xuzhou (Jiawang),

Xuzhou (Xinyi), Yangzhou

Anhui Wuhu, Huainan, Shouxian,Suzhou, Wuhuxian, Nanling, Huoshan,

Fengtai, Wuwei, Xiuningxian

Zhejiang Hangzhou (Xiaoshan),Shaoxing, Taizhou, Jinhua

Liaoning Dalian, Fushun, Jinzhou,Sujiatun(Shenyang), Jinzhou D. Zone,

Liaoyang, Gaizhou, Zhuanghe, Linghai,

Pulandian

Shandong Dezhou, Qingdao

Tianjin Tianjin Pipeline

Heilongjiang Harbin, Jiamusi,Shuangcheng, Mudanjiang, Jiagedaqi

Jiangxi Nanchang (Wanliqu)

Henan 11 city gas concessions


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Natural Gas Business


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Natural GasBusiness Model

Storage tanks

(spherical or cylinder)

Natural gas fields

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

City gate

Industrial users*

Residential

households*

Commercial users*Car refueling station

National or provincial

pipelines


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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

Exploration

Wellhead priceTransportation

Transmission tariffsDistribution

Distribution cost + margin

END-USER TARIFF COMPONENTS

NDRC Approval Local Price Bureau Approval

Natural gas business operates on a cost-plus pricing model


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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

-

50

100

150

200

250

300

350

400

450

500

550

600

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

LNG imports

Pipeline imports

Other imports

CNOOC

Sinopec

PetroChina

Billionm3

China Natural Gas Supply Projection

Source: NDRC


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Peer Group Analysis

Sales Revenue Growth FY2009/2010

Source: individual companies annual reports

Number of Gas Projects

Source: individual companies annual reports


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Liquefied Petroleum Gas (LPG) Business


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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.

Beijing

Shanghai

Heilongjiang

Jilin

Liaoning

Inner Mongolia

Xinjiang

Tibet

Qinghai

Gansu

Ningxia

Shaanxi

Shanxi

Henan

ShandongHebei

Jiangsu

Anhui

Zhejiang

Fujian

JiangxiHunan

GuangdongTaiwan

Guangxi

Hainan

Yunnan

Guizhou

Sichuan

Chongqing

Tianjin

Hubei

LPG receiving terminals and storage facilities


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LPGBusiness Model

Oil Refinery

LPG Receiving Terminal

Class 2 Station

Assets owned by the Group

LPG vessels

LPG trucks

Trucks sending bottled LPG

Import/

Domestic Supply

Class 1 Station

Storage Facilities

Domestic supply

Class 3 Station

Bottling Station

Residential householdsCommercial users

Industrial users City gas companies


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Value Chain of LPG Supply

Oil RefineryClass 1

Station

LPG Wholesaler

Class 2 Station

Bottled LPG Maker

Class 3 Station

Bottled LPG

Retailers

5-6% 6-7% 10-12%

Source: Company data

Gross Margin (%)

2009 LPG gross margin for China Gas: 5.7%

2010 LPG gross margin for China Gas: 8.7%

4-5%


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LPGMarket Share and Margins Outlook

LPG Market Share by volume LPG Gross Margin Expansion



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LPGSupply and Demand in China


-

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

32

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Feedstock for Cracking

Industry

Commercial (Transportation and etc)

Residentail Gas

China LPG Demand by Sector

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

2 00 0 2 001 20 02 2 00 3 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 2 01 2 2 01 3 2 01 4 201 5

SupplyDemandNet Trade

China LPG Supply and Demand


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Operational Highlights FY2010


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Natural GasSales Volume (as at 31 Mar 2010)

Period Sales Growth Total

FY10 54.5%

FY09 102.5.%

FY08 165.8%

Period Sales Growth Natural Gas Only

FY10 58.7%

FY09 104.1%

FY08 191.7%

Totalsalesvolum

e(millionm3)


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Natural GasCustomer Breakdown (as at 31 Mar 2010)

Sector

Sales Volume

Growth in FY10

% of Total

Volume

CNG Stations 46.5% 7.3 %

Commercial 52.3% 10.0%

Industrial 64.2% 71.1%

Residential 41.7% 11.6%

Naturalgassalesvol

ume(millionm3)


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Natural GasCustomer Data (as at 31 Mar 2010)

Customer Growth Organic Acquired

FY10

Portfolio Total Change from FY09

FY09

Portfolio Total

Residential 657,907 434,159 4,837,436 29.2% 3,745,370

Industrial 323 67 810 92.9% 420

Commercial 3,825 1,140 33,476 17.4% 28,511

CNG Stations 31 - 91 51.7% 60

Customer Tariffs (ex-tax)

(RMB / m3) FY10 Change from FY09 FY09 FY08

Residential 1.88 1.6% 1.85 1.75

Industrial 2.09 6.1% 1.97 1.84

Commercial 2.13 3.4% 2.06 1.85

CNG Stations 2.17 4.3% 2.08 1.95


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Pen

etrationRate

UrbanPopulationCovered(m)

Natural gas daily consumption Urban population covered and penetration rate

(000m3)

Natural GasOther Operational Data (as at 31 Mar 2010)


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FY10 Change from FY09 FY09 FY08

Residential Connection Fee

(RMB per customer)2,368 -2.8% 2,437 2,295

Total Pipelines (km) 31,513 21.8% 25,886 16,217

Natural GasOther Operational Data(as at 31 Mar 2010)


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LPGOperational Data (as at 31 Mar 2010)

FY10 FY09*

Sale tonnage (ton) 944,000 495,155

Gross Margin (%) +8.7% +5.7%

Operating Margin (%) + 1.6% - 0.2%

Net Profit Margin (%) + 0.2% - 2.1%

* Only half year data as China Gas commenced LPG business in Sep.2008


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Financial Highlights FY2010


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Financial SummaryIncome Statement

HK$ ('000) FY10 % change FY09 FY08

Turnover 10,211,959 61.5% 6,323,823 2,552,075

Gas Sales 3,831,627 43.1% 2,678,377 1,691,159

Connection Fees 1,461,573 29.6% 1,127,403 615,282

LPG Sales 4,637,924 104.1% 2,272,173 -

Other 280,835 14.2% 245,870 245,634

Gross Profit 2,116,292 48.1% 1,429,349 746,119

Profit after tax 1,015,501 658.1% 133,959 187,571

Profit Attributable to Shareholders 875,636 744.6% 103,679 141,059

Basic EPS (HK Cents) 26.19 742.1% 3.11 4.39

Gross Margin Gas Sales 20.8% - 19.1% 15.9%

Gross Margin Connection Fees 70.6% - 67.4% 72%

Gross Margin LPG Sales 8.7% - 5.7% -


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Financial SummaryBalance Sheet & Debt Position

HK$ ('000) FY10 FY09 (restated)

Total Assets 22,997,594 18,024,749

Total Equity 5,230,237 3,982,128

Shareholder's Equity 4,123,022 3,223,270

Cash 4,361,419 2,896,457Short-term Bank Debt 5,294,761* 3,103,855 **

Long-term Bank Debt 8,021,345 7,194,067

Convertible Bond - 14,823

* 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


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FY2011-12 Outlook


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Natural Gas Pricing Reform

Period of Non-Pass Through

As a % of Total

Revenue Full Year 6 month 3 month

% of Volume

passed-

through

(residential

users only)

0% (0.95%) (0.47%) (0.24%)

50% (0.47%) (0.24%) (0.12%)

90% (0.09%) (0.05%) (0.02%)

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 ofonlyRMB0.23/m3 and we anticipate residential userscan 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


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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 toconnect 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 2million tons by 2012

Improved margins: To reach 15% gross

margin and 5% net margin by 2012

Natural Gas LPG


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FY2011-2012 Guidance

FY2011 FY2012

Gas volume (m3) 4.8 bn 6.0 bn

New residential connections 700,000 850,000

CNG stations to reach 120 180

LPG sales (million ton) 1.3 2.0

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


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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 Companys product and services in the marketplace, competitive factors,

new products and technology changes, the Companys 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 securitiesor financial instruments or to provide any investment service or investment advice.

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