BEIJING, March 14 -- China Gas Holdings Ltd, a Hong Kong-listed distributor of piped gas, will form a 20 million U.S. dollars joint venture with South Korea's SK E&S to expand in Chinese mainland as the demand for cleaner-burning fuels increases.

The two companies will each take a 50 percent stake in China Gas-SK Energy Holdings Co to develop city gas business, SK E&S said in an e-mailed statement yesterday, Bloomberg News reported. SK Corp, South Korea's largest oil refiner, owns 51 percent of SK E&S.

China Gas wants to benefit from increased gas demand in the world's second-biggest energy consuming nation, where authorities are implementing policies to cut pollution. The company's sales may increase more than fourfold from last year's levels by 2008, it said on March 1.

"SK Group considers China and Korea as a single energy market," Kim Joong Ho, chief executive director of SK E&S, said in the statement. "In the long run, we see this as an opportunity to further expand our network in the region through diversified strategies and distribution channels."

The venture has a long-term plan to expand into "strategic regions" in Southeast Asia, SK E&S said in the statement. It will also grow into compressed natural gas and liquefied petroleum gas businesses, it said. Proposed cooperation with SK Corp will combine China Gas's distribution network and SK's technical and management expertise, Managing Director Liu Ming Hui said in Hong Kong.

SK E&S is a city gas, mass energy and liquefied petroleum gas company with sales of 5.3 billion U.S. dollars last year, SK said in the statement.

The company plans to take 10 percent of the mainland's city gas business between 2015 and 2020, Kim said. It "may consider" taking a stake in China Gas, he said.

China Gas may sell 400 million cubic meters of gas this year, compared with 176 million cubic meters in 2006, Leung said on March 1. Sales in 2008 may climb to as much as 800 million cubic meters, he said.

The central government wants gas to contribute eight percent of energy supply by 2010 from about three percent now.

China's demand for natural gas will increase by more than 15 percent annually for the next 20 years and consumption may rise to 300 billion cubic meters by 2030 and 450 billion cubic meters by 2050 from 45 billion cubic meters now, Wang Jing, deputy director at the oil and gas department in the energy bureau of the National Development and Reform Commission, said in November.