Chinese Firm Invests in U.S. Natural Gas Stations

Published on Author tyrrell

A large private Chinese firm called ENN Group has plans to build 50 natural gas stations in the United States this year.  The move is designed to capture a share of the heavy-duty truck fueling market that uses natural gas, which is cheap and abundant in the United States.  In order to build a natural gas station, roughly one million dollars is required as an initial investment.  Thus far, ENN Group has invested $50 million, and its U.S. joint venture partner declines to say how much it has invested.  This natural gas market is expected to see significant growth in the near future, because shipping companies can save $2.00 per gallon of fuel when switching from diesel to natural gas.  By making natural gas fueling stations more common, ENN Group hopes to convince more shipping companies to switch from diesel powered trucks to natural gas powered trucks.   ENN Group will face stiff competition from firms that are already established in the United States.  Its competitors include Clean Energy Fuels Corp (backed by T. Boone Pickens and Chesapeake Energy) and Royal Dutch Shell Plc.

Source: Reuters

6 Responses to Chinese Firm Invests in U.S. Natural Gas Stations

  1. Cash-rich Chinese companies are now themselves engaging in FDI. Most of China’s foreign reserves are held in the form of US Treasuries, which earn a low return. (More generally they are held in US dollars, which concentrates exchange rate risk.) So how to do better? This is one answer.

    Now FDI still carries exchange rate risk, but adds to that the risk of potential capital gains (and losses). The note above indicates both a growing market and strong competition. My guess is that here competition is good, because there’s a network externality at play: if there are few refueling stations, truck companies are reluctant to use CNG [compressed natural gas] vehicles. Every increment – here 50 stations by one company – shifts that decision in a good direction. It would be helpful to know how many CEF and RDS have built.

    What of other examples of Chinese FDI? We hear about investment in Africa (one term paper forthcoming on that!) and there’s Lenovo, which purchased IBM’s PC business, and Volvo, purchased from Ford when the latter was desperate to raise cash at the onset of our Great Recession. I’ve not searched for literature on this wider issues, but I’ve seen a new category of “outward FDI” included in Chinese balance of payments data. So there surely are papers on the topic.

  2. The U.S. Department of Energy indicates that there are currently 574 CNG fueling stations in the United States, so ENN Group’s planned 50 additional CNG fueling stations represents an increase of nearly 10%. If ENN Group can maintain that percentage of the market as CNG availability grows and becomes more common, the firm could potentially make a huge return on their investment in the U.S.

    http://www.afdc.energy.gov/fuels/natural_gas_locations.html

  4. Interesting move considering the recent deal that China made with Russia to boost oil supplies and resource access. It really seems as if China’s making big moves to grow their economy at home and by use of foreign direct investment.

  5. Good move for cleaner energies in China. We read about the harshness GM went through to form the joint venture, Shanghai GM, with the Chinese in the automobile industry. While it is great that China is open about foreign direct investment in a broader range of industries, it’ll take some years for the joint venture to develop and produce positive results.

  6. Cleaner energies is China has had large amounts of publicity and with relatively low health levels and profound amounts of pollution(increasing every year), China needs to focus on how to temper these issues and be proactive in attacking them. With so much energy from coal, oil is a step in the right direction but not a solution to their problem. Severe adversity is to come if China does not begin to regulate and possibly begin a more extensive cap and trade policy.