(EnergyAsia, May 23 2012, Wednesday) — US-based GreatPoint Energy and China Wanxiang Holdings said they have officially concluded a partnership agreement and joint investment in a large project in the western Chinese region of Xinjiang to convert coal into natural gas for consumption in the eastern provinces.

GreatPoint Energy, which sold an unstated “large” equity stake to its new partner, has raised equity investment and secured project funding of US$1.25 billion from Wanxiang to finance and construct the first phase of the ‘Bluegas’ plant to produce one trillion cubic feet of gas a year.

Using GreatPoint Energy’s proprietary Bluegas(TM) technology, the plant’s first phase is expected to start producing 30 billion cubic feet/day in 2015, rising to 116 billion cubic feet/day within two years.

China Petroleum and Chemical Corp or Sinopec, the country’s largest company by revenue, has agreed to purchase the plant’s gas output for distribution to major consuming centres in the eastern provinces including Guangdong and Zhejiang, and Shanghai city. Sinopec has already announced plans to construct a pipeline to deliver the gas.

The Bluegas project is expected to contribute toward meeting China’s rapid energy demand growth and strong desire to improve environmental quality. It will provide domestic, clean energy derived from a very large and low-cost coal resource base in the western regions of the country.

The project was first highlighted during an official signing ceremony between senior US and Chinese government officials on February 19 this year.

GreatPoint Energy said it developed and owns the Bluegas hydromethanation technology that directly converts coal into pipeline quality natural gas, the cleanest commercial fuel in use. The company said its proprietary technology operates at the highest efficiency with the least environmental impact, and produces natural gas at the lowest cost in the industry while consuming water at the half the rate of competing gasification systems.

Inherent in the technology is the ability to capture nearly all emissions, including carbon dioxide, which can be sequestered and used for oil production through enhanced oil recovery methods. The technology is especially well suited for arid regions and where low-quality, concentrated coal resources are available, such as in Xinjiang.

GreatPoint Energy said that it and Wanxiang are planning to develop large-scale Bluegas projects at other locations in Xinjiang and in other parts of China.

 With the proof of concept, GreatPoint Energy intends to expand to other significant natural gas markets in other parts of the world including Japan, South Korea, India and Europe.

“Wanxiang is pleased to be a major shareholder in GreatPoint Energy,” said Wanxiang Group’s chairman, Lu Guanqiu.

“Wanxiang believes that GreatPoint Energy’s Bluegas technology is the world’s most advanced, lowest cost and most environmentally friendly technology for transforming coal into natural gas. Wanxiang looks forward to seeing GreatPoint Energy become a global leader in the supply of clean energy.”

Gu Jun Yuan, President of China Wanxiang Holdings, said: “This partnership between Wanxiang and GreatPoint Energy represents the beginning of a very significant opportunity to convert some of the world’s most abundant and low cost coal supplies into trillions of cubic feet of clean, valuable natural gas.”

Andrew Perlman, CEO of GreatPoint Energy, said: “We are building a major new global energy producer for the 21st century and focusing on one of the largest, most attractive, and fastest growing natural gas markets in the world. We are extremely pleased that one of the most successful and well-respected companies in China has become a major shareholder in GreatPoint Energy.”

Daniel Goldman, President and Chief Financial Officer of GreatPoint Energy, said:

“We welcome Wanxiang as one of our strategic investors and establish a joint venture with them in China. This agreement provides a tremendous pathway for commercialisation of the Bluegas technology and enables us to develop and finance multi-billion dollar projects and provide large quantities of natural gas that will compete with supplies from neighbouring countries.

“We are particularly excited to contribute toward meeting China’s rapid natural gas demand growth with American technology and engineering of a highly efficient and cost-effective clean energy solution. We are confident that this partnership will create thousands of new high-quality engineering, technical and construction jobs in the US and China as we build-out large-scale, environmentally attractive gas production facilities.”

Founded by Mr Lu in 1969, Wanxiang has grown to become one of China’s largest private companies with operations across the country and in more than 40 countries around the world. Wanxiang is a diversified manufacturing enterprise with interests in equipment and automotive parts manufacturing, where it has become one of the largest global suppliers, clean energy, financial services, agricultural products, natural resources, real estate and investments.