Mumbai: GAIL (India) Ltd. will form a joint venture with China Gas Holdings Ltd. to pursue gas sector business opportunities in India, China and third countries countries, a GAIL statement said.

The proposed 50:50 venture will initially focus on city gas distribution and coal seam gas projects. "Subsequently, more projects shall be identified and implemented by joint venture. Project specific joint ventures will be formed along with local governments/companies, wherever it is required," the statement said.

"GAIL''s expertise in the midstream and downstream gas sector and China Gas'' track record in securing contracts and rapid expansion shall be leveraged to make the joint venture successful," it added.

"The joint venture has initially identified compressed natural gas and coal bed methane projects," the two companies said in a statement, after the pact for the joint venture was signed in New Delhi.

"The business of the joint venture shall be primarily related to natural gas projects in the areas of compressed natural gas, city gas, coal bed methane, pipelines and liquefied natural gas in China, India and other countries."

According to Liu Ming Hui, managing director of China Gas, GAIL was one of the first companies with which his company had formed a strategic venture and added he looked forward to the success of the Sino-Indian joint venture.

GAIL had made a strategic investment in China Gas in May 2005 by acquiring 210 million shares and it currently holds around 7 per cent equity interest in the company. GAIL also received dividend from China Gas for the year 2005-06.

"After the joint venture is formed, action should be speeded up on the city gas front," said U D Choubey, chairman and managing director of GAIL. "It should also look at modular liquefied gas systems which China Gas had been pursuing."

The two sides would have equal representation in the management of the venture and key positions held by their representatives will be rotated every two years, the statement issued by the two companies said.

"GAIL and China Gas recognise the potential of adding value to their businesses by cooperative approach based on complementary skills and strengths to jointly exploit city gas compressed natural gas," it added.