Fortune Oil said it has signed an agreement with Tianjin Gas to establish a joint venture that will be responsible for the supply of liquefied natural gas (LNG) to the city of Tianjin, China's sixth most populous city.

The joint venture company will manage, on a non-exclusive basis, the procurement, import and supply of LNG to Tianjin Gas including securing reliable and competitive overseas LNG supply. Fortune Oil will hold 60 per cent and Tianjin Gas 40 per cent of the equity interest in the joint venture company.

Tianjin Gas is the largest natural gas supplier in Tianjin City responsible for gas supply and operations to 18 districts and counties in Tianjin City with over 95 per cent of the market, 2 million customers and 9,000 km of gas pipelines. Tianjin Gas is one of the main shareholders in the Tianjin LNG Import and Regasification terminal which is expected to start operations in 2013. The terminal will initially import 2.2 million tonnes (3 billion cubic metres) of LNG per annum into China using a floating storage and regasification unit (FSRU) with the plan to expand the LNG import terminal in Tianjin to a capacity of 6 million tonnes per annum (8 billion cubic metres) per annum from 2015.

LNG is the preferred method for transporting natural gas long distances and is becoming an increasingly important route to supply imported natural gas to China. In 2011 China imported over 12 million tonnes of LNG, principally from the Middle East, Australia and Indonesia, and, with several terminals currently under construction along China's coastline, this is projected to grow to over 30 million tonnes of LNG imports by 2015. With both the Company's and its management's international and domestic experience, Fortune Oil is uniquely placed to expand its LNG operations along the supply chain; from the import of LNG, through distribution and supply, to emerging downstream markets including its use as a fuel for ships and heavy duty trucks and buses.

Mr Tee Kiam Poon, Chief Executive of Fortune Oil, commented:

"Today's announcement is a further example of Fortune Oil's commitment to expanding its natural gas business in China. LNG imports will be a major source of Chinese natural gas supply and this joint venture enables Fortune Oil to utilise its international experience and align itself with the largest city gas company in Tianjin, establishing Fortune Oil in the rapidly expanding LNG supply chain."