Jiufeng Energy plans to invest over 3.4 billion yuan in the construction of the second phase of Xinjiang Qinghua’s demonstration project for coal-to-natural gas production, with an annual output of 5.5 billion cubic meters

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On the evening of the 29th, Jiu Feng Energy (605090) announced that it intends to act as an industrial investor, together with Xinjiang Qinghua and Henan Silk Road, to invest in the construction of the second phase of Xinjiang Qinghua’s demonstration project for coal-to-natural gas production, with an annual output of 5.5 billion cubic meters. The total investment for this project is 23.033 billion yuan, of which Jiu Feng Energy’s cumulative contribution shall not exceed 3.455 billion yuan; the funds are to come from internal resources or be raised independently. By then, the company will hold a 50% stake in the second-phase project, which will enable it to produce 2 billion cubic meters of natural gas per year. The second phase of the project is located in the Yidong Industrial Park, Yining County, Ili Kazak Autonomous Prefecture, Xinjiang Uygur Autonomous Region. It consists of two coal-to-gas production units, A and B, which employ different processes but are both capable of producing 2 billion cubic meters of natural gas per year. In addition to natural gas, by-products such as tar, middle oil, and crude phenol can also be produced. The project plans to raise funds for construction through various means, with equity contributions accounting for 30% of the total investment, amounting to 6.91 billion yuan ； The remaining 70% applies to financial institutions for medium- to long-term project loans or utilizes other financing methods. At the same time, the project will consider using \"BOT/BOO outsourcing\" for some system modules to further reduce the amount of equity capital required. The project construction period shall not exceed 36 months, and the payment for project construction is planned to be made in proportions of 30%, 40%, and 30%; each investor will also make payments in installments in line with the project progress. At present, the project has received approval from the **Development and Reform Commission, and all necessary approvals such as those for environmental impact assessment, safety assessment, site selection, land use, and water use have been obtained. To date, the energy-saving assessment and comparative analysis for the second-phase project have been completed; current efforts are focused on conducting environmental impact assessments, safety condition reviews, design reviews of safety facilities, and evaluations of water resource-related reports. Constrained by an energy structure characterized by abundant coal, limited oil, and scarce gas, China’s natural gas imports in 2024 amounted to 181.7 billion cubic meters, representing a 9.9% increase year-on-year, with an external dependence rate of 42.65%. Yining County in Ili Prefecture has proven coal reserves of 7.42 billion tons. It features shallow burial depths, thick coal seams, ease of extraction, and high-quality coal, providing an important resource foundation for local coal-to-gas projects. Since its completion and commissioning, the first phase of the Xinjiang Qinghua project (a coal-to-natural gas project with an annual production capacity of 1.375 billion cubic meters) has, through years of operation and experience, developed mature practices in terms of safety, technology, processes, operations, and cost control. Production has consistently operated at full design capacity, and a talent pool of over 1,000 people with expertise in coal chemical management and operation has been built up, laying a solid foundation for the implementation of this project. The second-phase project is expected to consume 11.796 million tons of raw coal per year, with the coal resources required coming primarily from Mine No. 2 and Mine No. 7 in the Yining mining area ； The annual water consumption is estimated to be around 22.316 million cubic meters, and the necessary permits for water extraction have been obtained. Xinjiang Qinghua has completed the construction of a gas pipeline spanning approximately 43 kilometers, connecting the coal-to-gas production facility to the first station in Yingyeer Township, Yining City, as part of the ** pipeline network. The second phase of this project will enable the delivery of coal-derived natural gas into the main West-East Gas Transmission pipeline network, thereby meeting the needs of customers along that network. According to the feasibility study report, the economic service life of the Phase II project is 15 years. Conservatively, the investment return rate can reach 11.74%, with the investment being recovered in about 7 years. Since this project is operated as a joint venture under the common control of various investors, it is not included in the company’s consolidated financial statements. Jiu Feng Energy will account for it using the equity method, recognizing investment income at 50% of its equity interest. The company will assign a professional management team to the project to ensure stable operation and controllable risks. In addition, listed companies will regularly carry out external audits of their shareholders to fully ensure the safety of funds allocated for project investment and construction. Jiufeng Energy stated that the implementation of this project will address the company’s shortcomings in terms of owned gas resources, thereby creating a diversified upstream resource pool that includes owned gas, long-term contracted gas, and spot gas. In the future, equity gas resources and offshore gas contracts will constitute the company’s core resources; the cost advantage of these resources will increase significantly, and the company’s ability to exercise control over them will further strengthen.