Zhongyu Gas Cooperates with Strong Technical Partner to Accelerate Upstream CBM Resources Development

Zhongyu Gas Cooperates with Strong Technical Partner to Accelerate Upstream CBM Resources Development

September 21, 2007

    HONG KONG, Sept. 21 /Xinhua-PRNewswire/ -- Zhongyu Gas
Holdings Limited ("Zhongyu Gas" or the
"Group") (Stock Code: 8070.HK), an early mover in
developing a vertically integrated gas operation from
upstream resources development to downstream distribution
in China, is pleased to announce the signing of an
engineering cooperation contract with Qinshui Lanyan
Coalbed Methane Co. Ltd. ("Lanyan") for the
coalbed methane ("CBM") projects. 

    Scope of Cooperation

    Further to the memorandum of understanding announced on
9th May, 2007, the Group has entered into the turnkey
contract with Lanyan, in order to commence the CBM project
in Jiulishan, located in the Jiaozuo CBM block of Henan
Province, the PRC. Pursuant to the contract, the first 40
vertical wells among the Group's overall CBM development
plan will be drilled and extracted by Lanyan with
guaranteed daily production of 1,500 m3 per well. The gas
production is expected to start by the end of this year.

    The Cooperation Parties

    Zhongyu Gas is a vertically integrated gas operator
which enjoys the exclusive right to develop upstream
resources in 8 CBM blocks in Henan. In the past few months,
Zhongyu Gas has made significant progress in CBM
development. In addition to the abovementioned 40 wells,
first phase of drilling in two pilot testing wells and 20
vertical wells in Zhongyu Gas' Jiaozuo CBM block has
already been completed, and the second phase -- the
fracturing process will start soon in this month. As at the
reported date, the Group has commenced drilling of testing
wells in CBM blocks including those in Hebi, Pingdingshan,
Yima and Yongxia. Also, fund raising activities were
completed successfully for the financing of its upstream
and downstream projects.

    Since its establishment in 2003, Lanyan has been
principally engaged in the exploration and development of
CBM and gas supply related business. It enjoys the biggest
vertical well drilling capacity in China. Lanyan has
drilled 600 wells and operated 120 wells with average daily
gas production of 500,000m3. It is equipped with advanced
technology and experienced technicians for exploration and
development of CBM. Lanyan was also awarded first prize
from the Association of Industry of Coal in China on its
technology entitled coal mine region CBM pre-exploration
extraction technology.

    About Coalbed Methane

    CBM is a form of natural gas found on top of coal
deposits. It is harmful to the environment if emitted to
the atmosphere, but is a clean fuel when burned. It is
completely interchangeable with conventional natural gas
and can be readily mixed with the latter. The Chinese
government has promulgated favorable policies on the
development of CBM to address its focus of clean energy
development.  The extraction of CBM can also improve mining
safety since it removes the highly flammable gas from coal
mines.

    Mr. Wang Wenliang, Chairman of Zhongyu Gas, concluded,
"We are excited to announce the signing of a turnkey
contract with Lanyan. It is favorable to hasten our
upstream CBM resources production. With the enormous
efforts put in and the forthcoming commencement of CBM
extraction, our vertically integrated gas operation is
progressing well as planned. We will continue to leverage
our upstream resources and extended downstream projects and
be dedicated to maximizing shareholders' returns."

    About Zhongyu Gas Holdings Limited (Stock Code:
8070.HK)

    Zhongyu Gas Holdings Limited ("Zhongyu Gas")
(Stock Code: 8070.HK), is an early mover in developing a
vertically integrated gas operation from upstream resource
development to downstream distribution in China. This is a
unique model in the China gas sector. Zhongyu Gas enjoys
the exclusive right to develop CBM resources in Henan, a
province with proven CBM reserves of approximately 1
trillion m3 (34 trillion ft3). It has also formed strategic
alliances with strong technical partners who have successful
track records in extracting CBM resources in a commercially
viable and economically attractive manner. Currently,
Zhongyu Gas has nine downstream projects under operation
(Sanmenxia, Yongcheng, Linyi Zhongyu, Linyi China Gas,
Xinmi, Yanshi, Jiaozuo, Luohe and Jiyuan). Zhongyu Gas was
listed on the GEM board of the Stock Exchange of Hong Kong
in 2001.

    Released by the CCG Elite Investor Relations Limited
for and on behalf of Zhongyu Gas Holdings Limited. 


    For further information, please contact:

     Zhongyu Gas Holdings Limited
     Mr. Daniel Lui / Ms. Lucy Sun
     Tel.:  +852+2295-1550 / [phone]
     Fax:   [phone]	
     Email: [e-mail]/
[e-mail] 

     CCG Elite Investor Relations Limited
     Ms. Gloria Chan
     Tel.:  [phone]
     Fax:   [phone]	
     Email: [e-mail]