SINO Gas & Energy Holdings (SEH) will supply up to 10.5 million standard cubic feet of gas per day to a major distributor in China’s Shanxi province under a new gas sales agreement, the company has announced.

SEH’s joint venture partner China United Coal Bed Methane signed the two year deal to provide gas to Xing Xian Huasheng (Huasheng) for an agreed price of RMB 1.61 per cubic metre, with options to increase volumes under the contract.

The contracted gas price is effective until the end of 2016 and is adjustable to take into account changes in local market conditions and government policies as they are implemented.

Gas sold to Huasheng will come from SEH’s Linxing central gathering station (CGS) – with the first major customer expected to be a large alumina plant owned by China Aluminium Corporation (Chinalco).

“Huasheng plans to increase the number of plants in the vicinity of the Linxing and Sanjiaobei CGS’ connected to its pipeline network in the near future,” SEH said in an announcement.

“Several of these, including Chinalco, have material expansion projects underway or planned, creating the potential for further significant growth in gas demand from this customer.”

Huasheng is currently laying a pipeline to transport gas from the Linxing CGS to its facilities, with construction expected to be completed by the time sales commence in the third quarter of 2016.

Sino Gas managing director Glenn Corrie said the company was increasing the number and diversity of its offtake options as production continued to ramp up.

“This contract underscores the depth, robustness and diversity of the Chinese gas market, in particular the provincial demand,” he said.

“Huasheng is a strong, local group and with their extensive gas distribution network and customer base, provide opportunity for a long-term, scalable alternative for both the Linxing and Sanjiaobei gas.”