- Moody's Investors Service has assigned a first-time Ba1 corporate family rating to China Oil & Gas Group and a provisional Ba1 senior unsecured bond rating.

The outlook for these ratings is stable.

Moody's vice-president and senior credit officer Ivan Chung said: "COG's Ba1 corporate family rating reflects the steady revenue contribution from the company's operating natural gas projects, which encompass its downstream operations in piped city gas distribution, its gas stations, as well as its midstream operations in branch pipeline transmission and liquefied natural gas (LNG) processing and logistics."

COG started its piped city gas distribution projects in 2002. In 2012, its gas sales were 1,930 million cubic metres, covering 523,400 households and 4,690 commercial and industrial users and other users.

"The working relationship with Kunlun Energy and the favourable operating environment in China's gas distribution sector also support the rating," says Chung.

Kunlun Energy, a subsidiary of China National Petroleum Corporation (Aa3/positive), has been a key joint venture partner of COG since 2002.

This relationship provides COG with good access to upstream resources, core pipeline networks, and industry expertise. In addition, CNPC's subsidiaries grant loans to COG at favourable interest rates.

Moody's notes that another positive rating driver comes from the consideration that the Chinese government has launched supportive policies and investments to boost the use of natural gas in recent years.

Natural gas accounted for 4.5% of China's primary energy consumption in 2011 and this ratio is targeted by the government to reach 7.5% in 2015, compared with a global average 23.7%.

In 2011, total natural gas consumption in China was 131 billion cubic metres and is expected to reach 230bn in 2015.

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