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Sino Gas & Energy Holdings

By Dan Stratful (AFA)

Friday 10th August 2012

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Sino Gas & Energy Holdings (ASX: SEH) is an Australian company with a key focus in developing Chinese gas assets. The penny shares are ultra-speculative, however SEH holds a portfolio of unconventional gas assets in North China's Ordos Basin - the second largest onshore oil and gas producing basin in China.

The Ordos Basin has mature field developments with established pipeline infrastructure to major markets, and natural gas is seen as a key component of China's future clean energy supply. 

MIE Holdings Corporation and SEH have announced a strategic partnership whereby MIE will invest $100 million to acquire a 51% stake in one of SEH's subsidies, which removes some of the financing risk surrounding SEH.

The strategic partnership also brings together the financial strength, on-ground operational capability and Chinese regulatory experience of MIE and the technical expertise of SEH.

MIE is one of the leading independent onshore upstream oil companies in China and its key attraction is its proven ability to successfully deliver gas projects through the Chinese regulatory system and then operate them in a highly efficient manner.

The $100 million investment by MIE removes funding hurdles and SEH can now begin the next phase of its project development.

China, which is the world's 4th largest gas market after the US, EU and Russia has an unsatisfied and growing demand for gas, and its new pricing regime sees domestic gas prices linked to imported gas prices. China's Ordos Basin is a resource rich basin with low well costs and large resource recoverability.

SEH has the potential to become a significant gas company and with 60% of its acreage still to be explored, there is significant exploration upside. The shares should be treated as speculative.

Status: SPECULATIVE BUY

SEH's shares today traded at 6.4c


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