Honghua to target shale gas projects
May 31, 2012 Category Alternative energy, Environment
Honghua Group, one of the world’s largest producers of land-based oil and gas drilling rigs, plans to take minority stakes in shale gas exploration projects in China in a bid to forge closer ties with its customers. Honghua Chairman Zhang Mi said that when private firms were given the green light to invest in shale gas projects it would take small stakes in them – possibly as a co-investor with state oil and gas producers – to try to facilitate sales of its drilling equipment and engineering services. A sum of HKD592 million had been set aside from the proceeds of the group’s stock market listing in 2008 to fund oil and gas exploration and the provision of related products and services, said Zhang. A new generation of drilling rigs that were more cost-effective and space-saving were being trialled on the market, he said. Natural gas is used to generate power to drive the rigs instead of diesel, which makes drilling more cost-effective, since gas is cheaper than oil in China and the United States – countries that are among the world’s richest sources of shale gas. Bidders in the second round must be China-registered firms with registered capital of at least CNY300 million and “good” financial records – effectively opening the door to non-state-owned Chinese firms. Honghua posted a net profit of CNY168 million last year, after suffering a net loss of CNY184.2 million in 2010 and a loss of CNY127.3 million in 2009, when orders were cancelled or delayed after the global financial crisis made it difficult to get financing. Overseas sales accounted for 90% of revenues last year.
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