Oil and Gas Related Operations

To become a large vertically integrated player in the oil and natural gas-related industry

In August 2004, the Group completed the injection of the edible oil business into Aptus Holdings Limited (“Aptus”), a listed company in GEM (8212HK) for HK$ 4,000,000 in return for Aptus issuing 190,476,190 shares as consideration. In addition, the Group completed subscribing for an additional 735,095,238 shares of Aptus, thus became the major shareholder.

In January 2006, Aptus completed the acquisition of a 70% equity interest in CNPC Huayou Cu Energy Investment Co. Ltd. giving it an effective 56% in the profit sharing rights of Xin Jiang Oilfield for a consideration of HK$ 15,000,000. Xin Jiang Oilfield is located in the northwestern rim of Junggar Basin of Xin Jiang province, 120 km east to Karamay City. It is a crude oil field which was discovered in 1960s and has over 40 years of exploration history. The Xin Jiang Oilfield comprises three heavy oil blocks with a total mining area of approximately 10.9 m2 and a total estimated reserve of approximately 31 million tones crude oil. The development and operation of the oilfield is being managed and executed by Huayou.

In February 2007, Aptus completed the capital injections into two natural gas pipeline joint ventures in the province of Hunan, the PRC. Aptus had injected a RMB 79,599,000 (approximately HK$ 77,281,000) and RMB 131,707,900 (approximately HK$ 127,872,000) respectively in return for a 33% stake in Hunan Huayou Natural Gas Transportation and Distribution Company Limited (“Hunan Joint Venture”) and 48.33% stake in Chandge Huayou Gas Co., Ltd. (“Changde Joint Venture”). Hunan Joint Venture is a provincial level main gas pipeline and is connected with the Zhongxian-Wuhan pipeline which is a branch from the trunk of the West-East Gas pipeline. Changde Joint Venture is a city level natural gas pipeline distribution network that connects the Hunan Joint Venture to residential, commercial and industrial customers in Changde City.

As for Aptus, it is our objective to become a large vertically integrated player in the oil and gas-related industry. We will continue to scale up the production at the two natural gas joint ventures in the Hunan province. The penetration strategy for Changde Joint Venture is to sign up industrial and commercial users in the area as they are the high consumption users by nature. In addition to the two natural gas joint ventures, the Group will continue to explore more opportunities in the natural gas-related business in the PRC as natural gas is a more environmental friendly energy source. Industrial users have been able to provide better quality products while reducing the impact to the environment thus creating a win-win situation.