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Gas Distribution Utility | Sanya City


Gas Distribution Utility | Sanya City, Hainan Province, China

At A Glance

Exclusive Concession Rights: Changfeng has 30-year (2007-2037) exclusive concession rights to deliver and sell natural gas to both homes and businesses in Sanya City and its surrounding area. This makes Changfeng a monopoly in this area.

Solid Recurring Revenues: Recurring revenue stream through its well-established pipeline network in Sanya City which is currently servicing over 150,000 customers and growing steadily.

Growth Potential: According to the 2010 Census, Sanya City has a population of 685,408 inhabitants. Launched in 2009, China’s international tourist destination policy is aimed at fostering the Hainan Island’s economic growth and development.  The City is quickly growing as it’s currently being developed into a major international tourist destination by the Hainan Provincial Government. Development is expected to be completed by the year 2020.

Operation Overview

Changfeng has 30-year (2007-2037) exclusive concession rights to deliver and to sell natural gas to all residential and commercial clients in Sanya City and the surrounding area; as well the Company has a secured gas supply through its annual 24 million  gas quota (2006-2015) at a favorable price. Changfeng’s customer base in Sanya City is providing, and will continue to provide solid free cash flow, allowing us to pursue growth opportunities in Mainland China along the PetroChina’s second West-East Pipeline II (“WEP II”).

Exclusive Concession Rights

In 2007, Changfeng was awarded exclusive concession rights for 30 years to operate a natural gas pipeline construction & piped gas sales business in Sanya City (including all the surrounding areas of Sanya City). The exclusive concession right were awarded by the local government and makes Changfeng the only natural gas distribution operator in Sanya City and the surrounding regions.
Pipeline Networks in Sanya City

Since 2003, the Changfeng has been building an extensive pipeline network in Sanya City. Currently, Changfeng’s existing gas pipeline networks in Sanya City include approximately 750 kilometers main pipeline and service pipeline, together with one city gates station, one gas pressure regulating station, and a CNG/LNG storage and gas processing station. The city gate station is mainly used for the connection with the gas deliver point of the state-owned natural gas processing plant, which is directly connected through high pressure sub-sea pipeline to the CNOOC (Hainan) Limited Ya13-1 gas field that is located approximately 100 kilometers offshore in the South China Sea.

Gas source

Currently, Changfeng’s primary gas source is from its annual 24 million cubic meters gas quota. This gas quota was initially allocated in 2006 to Sanya City which lasts until 2015 with a favorable price. This quota gas is from CNOOC’s Ya13-1 gas field that is located approximately 100 kilometers offshore in the South China Sea.


Since 2009, urban expansion and development of coastal tourism of Sanya City has increased. In order to meet the extra gas need, Changfeng has entered into other LNG (Liquefied Natural Gas) and/or CNG (Compressed Natural Gas) agreements to purchase extra natural gas subject to the market supply and price.


On December 16, 2014, Changfeng entered into a natural gas purchase and sale agreement with PetroChina Company Ltd. (“PetroChina”) regarding the purchase and sale of piped natural gas in 2015. As well, Changfeng has been working closely with the municipal government to find solutions to mitigate the negative effects of the gas shortage arising from urban expansion and rapid development of coastal tourism in Sanya City, as well as pressure from higher gas pricing for Other Gas. Some practical measures to address the problem include a sales price increase to commercial and industrial customers, a government subsidy, and additional temporary gas quota, which have been implemented successfully. The construction of Gas to Eletricity Exchange Program was completed in 2014 and a total of 5 million  of exchanged gas will be sold to the company in 2015.


Revenue from gas distribution utility in Sanya City operations comes from two separate sources:” gas sales, pipeline installation and connection fees.

Gas sales price to the end users are promulgated by the local government. Gas sales are generated from two types of customers: residential customers and commercial customers with different pricing. Residential customers are described as the residential building, including condominium and apartments building in the city. Commercial customers are described as the hotels and restaurants. According to the regulated pricing, the current gas sales price is RMB2.6/ cubic metres (Approx. C$0.5/ cubic metres) for residential customers and RMB4.7/ cubic metres (Aprrox.C$0.9/ cubic metres) for commercial customers (Effective November 23, 2012, the local price authority approved a 24% price increase for its non-residential customers in Sanya City. The selling price to its residential customers remains unchanged.

Gas connection fee is a one-time upfront charge which is billed by the Company to install the service pipeline and connect the clients’ gas fired facilities to the Company’s pipeline networks. Different gas connection fees are charged from different types of clients. According to regulated pricing guidance, residential clients are charged by a relatively fixed amount, and commercial clients are charged based on its maximum daily volume.

Growth Potential

Sanya City, known as “China’s Hawaii” is China’s most southern province and the only tropical tourist destination in China.

In 2009, The People’s Republic of China Central Government put forth a major development plan to have all of Hainan Province transformed into a major international tourist destination by the year 2020. As a result, massive construction of resort hotels and residential condominiums are currently under way throughout Sanya City, especially in Haitang Bay district.

Haitang Bay is one of the five major bays in Sanya City. It is a flagship project being promoted by the Hainan provincial government. The size of Haitang Bay development area is estimated at 98.7 square kilometers and includes approximately 24 km of beachfront. According to the local government’s development plan, more than 25 deluxe hotels will be built in Haitang Bay by 2020. Currently, four world-class hotels and one resort healing center are in operation and use the piped gas distributed by the Company for cooking and heating purposes. Those hotels include Hilton Hotel and Resort, Kempinski Hotel and Resort, and Sheraton Hotel. And Shagari-la Hotel is under construction.

The Company is hoping that as more hotels, as well as other customers, are constructed and connected to the Company’s pipeline network in Haitang Bay, it will drive revenue growth in the form of new connection fees and increased gas sales.

Photos of Changfeng Energy’s Pipeline Network & Supporting Infrastructure



Views of Sanya City




To learn more about Sanya City and the Haitang Bay district, please visit the following websitehttp://english.sanya.gov.cn

Map of Haitang Bay Development Area



(Current map view is 14 miles / 73920 feet above ground) areas highlighted in blue represent areas currently under construction.

Sanya City & Haitang Bay Project Location Map