RedChip's  Instablog

Send Message
RedChip's long history of success includes the first to issue independent research coverage on Starbucks in 1992. Other names RedChip discovered as they were on the cusp of becoming Blue-Chip stocks were: Nike™,™, Daktronics™. Over the years, RedChip has evolved into a... More
My company:
RedChip Companies, Inc.
My blog:
Smallcap Ideas
  • Sino Gas’ Long-Term Perspective Puts It on Natural Gas Industry’s Leading Edge 0 comments
    Oct 21, 2010 4:29 PM | about stocks: SGAS

    China’s surge in energy consumption over the past few years has turned the country into the world’s largest energy consumer, surpassing the U.S. well ahead of schedule. However, double digit consumption growth has also created one of the biggest source of greenhouse gases, putting China in a position of mounting pressure from the international community to reduce its pollution levels and energy use.

    While the PRC government is reluctant to adopt binding restrictions on its energy use, it has pledged to make its consumption more energy-efficient and has put a strong emphasis on the development of alternatives to fossil fuels as a growing proportion of its total energy use.

    Ten years ago, China consumed only half the amount of energy of the United States.


    The combination of China’s increasing energy consumption and greater emphasis on clean energy resources are the key success drivers for energy-producing companies in China. The PRC government is forcing energy producers to move away from polluting energy sources such as oil and gasoline and move toward cleaner sources such as natural gas, solar, and wind energy.

    Currently, natural gas makes up approximately 4% of the total market share in energy production, but that share is expected to increase to approximately 7% by 2015.

    Consumption of natural gas is forecasted to quadruple over the next ten years as China’s cities expand and the government continues to support the natural gas industry. Sino Gas International Holdings, Inc. (OCTBB: SGAS), a natural gas producer in China, has taken advantage of the projected demand increase for natural gas through strategic placement of its natural gas pipelines. SGAS offers a large percentage of its product to cities smaller than 300,000 that are experiencing rapid urbanization. By investing in the initial pipeline infrastructure of small, developing cities (Tier-2 and Tier-3 cities), the Company can expand at a faster rate than by focusing exclusively on breaking into Tier-1 markets like Beijing and Shanghai that already have large, established industry players.

    With a penetration rate of just over 11% in its addressable market, Sino Gas International Holdings, Inc. (OTCBB: SGAS) has significant running room for further exposure in both the residential and industrial markets of China’s fastest growing cities.

    Sino Gas’ strategy involves offering emerging cities the resources, capital, and pipelines needed to distribute natural gas. This is an important factor in SGAS’ strategic plan due to the fact that these emerging cities lack the capital to add new infrastructure. In return, the Company can obtain local monopoly agreements for up to 30 years from the municipal governments in many of its markets. Although these contracts are relatively common in China’s natural gas industry, SGAS’ early entry in these underdeveloped markets gives it a natural advantage over its competitors, who may attempt to expand into the same fast-growing provinces later in the game.

    The PRC government’s resolve to increase the country’s reliance on clean energy sources coupled with the huge opportunity to increase natural gas penetration (only about a quarter of China’s citizens have access to natural gas, compared with 70-80% in most developed nations) providing attractive long-term opportunities both for SGAS and for its investors.

    Disclosure:  The subject security is a client of RedChip Companies, Inc.  RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit

    Stocks: SGAS
Back To RedChip's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.