China Natural Gas Inc.

NASDAQ Global Market: CHNG

October 13, 2009

2

This presentation contains "forward-looking statements" within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including changes from anticipated levels of sales, future national or regional economic and competitive conditions, changes in relationships with customers, access to capital, difficulties in developing and marketing new products, marketing existing products, customer acceptance of existing and new products, and other factors disclosed in the Company’s Annual Report on Form 10K for the year ended Dec. 31, 2008 and all of the Company’s subsequent Quarterly Reports on Form 10Q, especially in the “Risk Factors” sections of these reports. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this presentation.

Safe Harbor Statement

3

Company Overview

Business China’s Leading Provider of Natural Gas Services

Headquarter Xi’an, China

Capital Market Timetable

• Established in January 2000• Listed in OTC BB in December 2005• Upgraded to NASDAQ Global Market in June 2009

Capital Structure

NASDAQ: CHNGPrice (09/25/09): $11.96Shares Outstanding.: 21.2 millionThree Month Avg. Trading Vol.: 139kMarket Cap: $253.4 million

Financials Fiscal Year Revenue Net Income

2009 E $78-83 million $17.5-18.5 million

2008 A $68 million 15.2 million

4

Large & Growing Market Opportunity for Natural Gas

Strong Government Support For Clean Energy Industry

High Brand Recognition and Market Leadership

Strategic Cooperation with CNPC for CNG Expansion

Large LNG Project Augments Long-Term Growth

Proven Management Team – Achieved Revenue CAGR ’06-’08 of 53%

China Natural Gas is Uniquely Positioned to Capitalize on China’sExpanding Natural Gas Market

Investment Highlights

• A leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural gas (PNG) for industrial, commercial and residential use

• 35 fueling stations for taxis and buses in Shaanxi (23 stations) and Henan (12 stations)

• Almost 150 million Nm3 sold in FY2008

• CNG suppliers include PetroChina Changqing and Shaanxi Natural Gas Co. among others

CHNG Overview

• Population: 8.3 million(1)

• Number of Vehicles: 940,000(2)

• GDP CAGR 17.4% from 2003 to 2008 (national average of 17.2%)

Xi’an City, Shaanxi Province

• Zhengzhou, Kaifeng, Xuchang

• Higher retail pricing

• Higher potential as car conversion rate increases

(1) Xi’an Municipal Government as at December 31, 2007(2) Xi’an Vehicle Management Bureau statistics as of December 31, 2008

Introducing CHNG

Henan Province

5

6

Tank Truck Fleet

Processing CNG Fueling Stations

Residential, commercial, industrial consumers

Distribution of CNG

Retailing of CNG

Liquefaction/Processing of

LNG

Distribution/ Delivery of

LNG

CNG CNG

Exploration / Production

Transmission

PNG

LNG LNG

Utility/Power Plants/Industrial

customers

CHNG’s existing core businesses CHNG’s core businesses under development (LNG plant currently under construction, expected to commence production by January 2010)

Growing Footprint in the Natural Gas Industry Supply Chain

7

Improving Delivery Infrastructure Will Drive Gas Usage Rate

Phase 1 of West East Pipeline constructed in 2004

Phase 2 will be completed in 2011

Xi’An

Three pillars of PRC’s gas supply are onshore (Northwest), imported (LNG) and piped (gas from Russia)

Xi’an is the central hub for China’s gas delivery from key Northwest region

Phase 1

Phase 2

8

•Strong Government Relations•Supply Contracts with PetroChina and Shaanxi Natural Gas•Perfect Safety Record•Strategic Location near Natural Gas Supply Pipeline•Successful Track Record of Organic and Acquisition Growth

Operating History

Dominant Supply Position and Operations

2005 2006 2007 2008 2009

First CNG fueling station

business in Xi'an

2009E

LNG project launched

Construction of LNG

processing and

distribution plant started

$40MM debt financing with Abax

Lotus completed

NASDAQ Global Market Listed

Construction of LNG Project

expected to be completed

before end of 2009

CNG Fueling Stations

Total Revenues ($MM)$18.8 $35.4 $67.724 3511

$4.91

High Growth Through Sustainable Competitive Advantages

39.3MM nm3 83.7MM nm3 147.7 MM nm3 CNG Sold Through Fueling Stations

Increasing Diversification of Revenue Sources

99

LNG production will commence in January 2010

2009

CNG Refueling Stations

Piped Natural Gas

Vehicle Conversion Liquefied Natural Gas

Vehicle Conversion

CNG Refueling Stations

Piped Natural Gas

2010

Business Segments

CNG Fueling Stations

LNG

Piped Natural Gas

10

11

Comprehensive Filling Station Network Drives Volume

•Taxis refill 3-4 times a day; buses 1-2 times

•Our network must provide them with accessible locations throughout the city

•Taxis take 2 minutes to refuel; buses take 6 minutes

Key Locations

Network Statistics

•Ownership of 23 stations in Shaanxi Province

•12 owned stores in Henan Province

•35 stations in total

12

CNG Business Model: Strong Cash Flow Annuity

12,439

26,736

53,225

45.7%

48.6%

52.2%

0

10

20

30

40

50

60

2006 2007 2008R

even

ue (

million

s)

42.0%

44.0%

46.0%

48.0%

50.0%

52.0%

54.0%

Revenue (US$)

Gross Profit

Margin (%)

Revenue and Gross Margin AnalysisFueling Stations / Sales Volume Analysis

USD '000 Self-built* Acquired (1) Self-built* Acquired (1)

Filling Station $1,300 $2,000 $1,300 $2,000Tankers (2); Locomotive (1) $400 $400 $400 $400

Total Investment $1,700 $2,400 $1,700 $2,400

Annual sale volume ('000 m3) 4,889 4,889 4,037 4,037Average sale price net of VAT ($/m3) 0.34 0.34 0.41 0.41

Annual revenue $1,673 $1,673 $1,675 $1,675

Gross margin (%) 52.5% 52.5% 54.1% 54.1%

EBITDA 751 751 793 793EBITDA (%) 44.9% 44.9% 47.3% 47.3%

Cash Payback period (years) (2) 2.26 3.19 2.14 3.03

Shaanxi Province Henan Province

13

Self Built and Acquired Stations Both Attractive

(1) Based on negotiated prices to date

(2) Defined as EBITDA/Initial Capital Investment + Gas Inventory

Historical cash payback between 2 and 3 years

New Joint Venture with CNPC

CHNG invests $3.6m for 49% stakeCNPC invests $3.7m for 51% stakeCHNG has 2 of 5 board seats and CEO appointee rights

Co-development of CNG fueling stations along West East Pipeline

Day to day operation of fueling stations5 planned in 4Q’09

Scope

Initial Investment / Ownership

Gas supply

CHNG Role

PetroChina Role

中石油昆仑CNPC Kunlun Limited

14

Vehicle Conversion Businesses

Vehicle Conversion Service

• 4 CNG conversion workshops in Xi’an

• Target customers: taxis, public transportation vehicles and fleet vehicles

40 to 60 day payback period for taxi conversion

Daily taxi fuel cost (based on 250 miles per day)

$20.8

$10.3

50% savings

CNG

•Significantly reduced harmful emissions (87% less NO2; 70% less CO; 25% less CO2)

•Longer service life – up two to three years over gasoline or diesel engines

•Reduced maintenance requirements

Other Benefits

Gasoline

Daily Savings

* Data source: HondaMotor Company

15

Business Segments

Piped Natural Gas

LNG

CNG Fueling Stations

16

Piped Natural Gas Businesses

•120 km high pressure natural gas pipeline

•Franchise monopoly rights for 40 years

•103,000 residential and industrial users (growing 10% annually)

•8 service areas

•Gas provided by Shaanxi NG (SOE)

•Regulated pricing

Piped Natural Gas

17

Business Segments

LNG

CNG Fueling Stations

Piped Natural Gas

18

Our 150MM m3 Gas Liquefaction Project in Yulin, Shaanxi

Liquefaction/Processing Distribution/Delivery

We are the only licensed supplier in Shaanxi Province

• Net Capacity is 150 million normal m3• 100% already committed • EPC contractor is Chemtex• Customer reach up to 1,600 km radius

(Guangdong, Guangxi, Fujian)

Upstream supply sourced from Petro China

19

20

LNG Project: Attractive Economics

•$45MM total cost; $32MM invested to date

•PetroChina supplying natural gas at their well head price• 150MM m3 per annum commitment

•Strong government assistance for utility infrastructure

•Highly automated plant will save labor costs

•Retail price USD 0.48 per m3 includes transportation up to 1,600 km

•Additional savings by using own transport tankers

We project to recover our $45 million total investment in less than 3 years from commencement of production

•Center of the Ordos Basin•1 km from PetroChina

Changqing natural gas purification factory

•25 acres of land for phase 2 and 3 expansion

•320 billion cubic meters reserves

•Expected to be the major transport hub

21

Yulin, Shaanxi LNG Project Completion Blueprint

1Q’10 1Q’08

2Q’07

4Q’09 4Q’10 2Q’08

Commence Constructio

n

Trial Testing

Purchase Contract

for Equipment

Secure Financing to Fund Plant

Purchase Transport Tankers

Commercial Operation

LNG Project on Track

Liquefied Natural Gas (LNG) Target Customers

• Natural gas power plants • City gas companies covering industrial,

commercial and residential end users• LNG fueling stations in cities and ocean

ports

Key Target Customers• The industrialized and urbanized eastern

and southern coasts of China

Key Target Geographic Markets

South China

East China

Strategic Customers

Contracted VolumeCustomer/Industry

50MM Nm3Municipal gas distributor

20MM Nm3Municipal gas distributor

70MM Nm3

20MM Nm3Municipal gas distributor

Gas fired power plant

160MM Nm322

•Demand driven support via conversion subsidies for cabs and buses

•1999 Clean Auto program implemented in 12 key cities

•Energy blueprint (2007) •New policy submitted in May 2009 further supports natural gas development

•CNG/Gasoline hybrid vehicles a top priority

23

Central Government

National Development and Reform Commission

Provinces and CitiesReduce consumption

of coal

Increase the use of natural gas

Subsidies and

beneficial tax policies

Market oriented

price mechanism

•11th 5-Year Plan: Reemphasized natural gas usage at expense of coal

•2007 Energy Law: Provided legal infrastructure for natural gas market Key PRC

Mandates

Explicit Policy Support for Natural Gas

24(1)IEA, Natural Gas in China, Market Evolution and Strategy (June 2009)

Industry and residential sectors both demonstrate high demand

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007

Electricity P lants

Heat P lants

Energy Sector

Industry Sector

Transport Sector

Residential

Commercial, Public Services

Feedstack Use in Industry

Natural Gas Consumption in China by Sector(1)

Volume in billions m3

CAGR 2000 – 2007: 17.0%

Robust Growth Since Broad Introduction 10 Years Ago

25

Addressable Market Still Very Large

Billion Cubic Meters

Annual ConsumptionTotal Reserve

Others76%

Natural Gas24%

U.S. Natural Gas vs. Total Energy Usage

5,978

2,266

0

1000

2000

3000

4000

5000

6000

7000

U.S. China

653

70

0

250

500

750

U.S. China

Billion Cubic Meters

Natural Gas3%

Others97%

China Natural Gas vs. Total Energy Usage

Source: US Energy Information Association, 2007; PRC Statistical Year Book, 2007

Available supply, government motivated by environmental concerns

26

Competition By Business Line

Xi’an City: Shaanxi Qinhua (JV with HK Town Gas – 0384.HK) 790,000 customers

Xi’an City: Xi’an Municipal NG (15 stations), another 35 privately owned (We dominate 1/3 Market)He’nan: Zhengzhou NG (8 stations)

Xinjiang Guanghui (600256.SH): 450MM m3 facility, FY08 sales of 306MM m3

Xinao Gas (2688.HK): 270MM m3 in two facilities (Shanxi and Ningxia), Operations began in 2009

CNG filling stations

Piped Natural

Gas

LNG

27

Comparable Peer Valuation

Figures in millions except per share data. Conversion rates: US$1.00 = CNY6.83 = HKD7.75

(1) Source: Bloomberg; Company guidance;(2) 2009 estimated revenue is the middle point of our guidance: $78 M - $83 M;(3) The 2009 estimated EPS is the middle point of our net income guidance, $17.5 M - $18.5 M divided by the latest share count, 21.2M;

        Sales(1)   EPS(1)   P/E(1)

Ticker Company Name Share Price

(9/28/09)Market Cap 2008A 2009E(2)   2008A 2009E(3)   2008A 2009E

CHNG China Natural Gas Inc 11.99 254.0 67.7 80.5 1.04 0.85 11.5x 14.1x

Peers

135 HK Cnpc Hong Kong Ltd 0.75 3,365.8 5,208.3 5,254.0 0.09 0.03 8.4x 22.2x

SNEN Sinoenergy Corp 1.31 20.9 40.9 n/a 1.02 n/a 1.3x n/a

600256 CHXinjiang Guanghui Industry

2.26 2,125.0 1,985.6 2,692.7 0.07 0.09 30.9x 25.3x

CLNE Clean Energy Fuels Corp 14.80 883.5 129.5 134.0 (0.90) (0.15) n/a n/a

2688 HK Xinao Gas Holdings Ltd 1.97 2,065.0 8,265.5 10,050.0 0.09 0.11 21.9x 17.4x

3928 HK Zhengzhou Gas Co Ltd 2.09 260.3 1,028.8 1,196.0 0.17 0.22 11.9x 9.5x

1083 HK Towngas China Co Ltd 0.35 676.9 4,409.2 3,166.9 0.01 0.02 26.1x 21.6x

Avg (ex CHNG) : 16.8x 19.2x

Median (ex CHNG) : 16.9x 21.6x

28

Pursue Strategic

CNG Acquisitions / Cooperation

Ensure Adequate Supply of

Natural Gas

Expand Compressor

Station’s Production Capacity

Expand Geographical

Coverage

Increase Market Share

in Existing Markets

Diversify into LNG business

Growth Strategies

25.130.7

2.8

7.4

3.5

5.8

55.7

28.3

13

4.6

2.3

5.1

7.1

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

2006 2007 2008 1H2008 1H2009

Natural Gas Gasoline Construction/Installation and Other

Robust Revenue Growth

(USD in millions)

Consolidated Revenues

2 yr C

AGR 2006 –

2008:

53%YoY Growth: 27%

$67.7

$35.4

$18.8

$30.9

$39.3

29

30

Consistent Financial Margins

Source: Audited Financials

17.4

32.7

13.8

19.9

9.1

15.2

6.38.1

44.5%

50.7%48.3%49.1%

20.5% 20.5%

22.4%25.8%

2007 2008 1H2008 1H2009

Gross Profit Net Income Gross Margin Net Margin

Solid Balance Sheet

Summary Balance Sheet

(USD In millions) As of June 30

Cash $13.3 $5.9 $9.7

Accounts Receivable 0.3 0.9 1.0

Current Assets 15.7 9.6 14.0

Total Assets 53.3 118.3 131.3

Total Current Liabilities 2.1 4.6 7.2

Long Term Liabilities 0.0 42.0 45.5

Shareholder's Equity $51.2 $71.6 $78.6

Long Term Liabilities/Equity 0.0% 58.7% 57.8%

As of December 31

2007 2008 2009

31

Compress Natural Gas (CNG)• CHNG prepays suppliers 15-30 days in advance• Buses prepay CHNG 1 month in advance• Taxis pay CHNG with cash

Liquefied Natural Gas (LNG)• CHNG prepays suppliers 1 month in advance• Customers pay CHNG 15-30 days in advance

Pipeline Natural Gas (PNG)• CHNG prepays suppliers 15-30 days in advance• Customers pay CHNG with cash

Consolidated DSOs• FY2007 – 4.5• FY2008 – 3.2• 1H2009 – 4.3

Strong Working Capital Position

Capital Expenditures• FY2007 – $10.5MM• FY2008 – $20.9MM• 1H2009 – $14.4MM

Cash Flow from Ops• FY2007 – $14.7MM• FY2008 – $62.2MM• 1H2009 – $10.4MM

32

3333

•Joined CHNG in May 2009•20 years in accounting and finance•Prior CFO to China Valves Technology (CVVT.OB) and Origin Agritech (SEED)

•CPA, Ph.D. and MBA

•Acquired CHNG in 2003 •Over 20 years experience in the energy business •Bachelor of Economic Management from Northwestern University (Shaanxi)

•Joined former company in 2001•More than 10 years in energy project engineering•Responsible for maintenance, safety and new construction

•Bachelor in Engineering from Nanchang Hangkong Industry College

Experienced and Proven Management TeamName

Qinan JiChairman and CEO

Experience

Jing ChenCFO

Bin WangChief Engineer

34

Large & Growing Market Opportunity for Natural Gas

Strong Government Support For Clean Energy Industry

High Brand Recognition and Market Leadership

Strategic Cooperation with CNPC for CNG Expansion

Large LNG Project Augments Long-Term Growth

Proven Management Team – Achieved Revenue CAGR ’06-’08 of 53%

China Natural Gas is Uniquely Positioned to Capitalize on China’sExpanding Natural Gas Market

Summary

3535

Contact Info

Company – China Natural Gas, Inc.Ms. Veronica Chen – CFO19th Fl Building B, Van Metropolis Tang Yan RdHi-Tech Zone | Xi’an, Shaanxi, ChinaTel: (86) 29-8832 7391 Email: veronica.chen@naturalgaschina.com

US Contact:Tel: (212) 401 1233, (917) 885 2981 Email: ir.chng@naturalgaschina.com

China Contact:Tel: (86) 29-8845 4353, (86)1399 287 9998

Investor Relations – ICR, IncMr. Michael Tieu11th Fl, North Tower, Kerry Centre, 1 Guanghua RdChaoyang District, Beijing, China 100020Tel: (86) 10 6599 7960Email: michael.tieu@icrinc.com

Legal Counsel – The Crone Law GroupMr. Mark E. Crone101 Montgomery St. Suite 1950San Francisco, CA 94104Tel: (415) 955 8900Email: mcrone@cronelaw.com 

Auditor – Moore Stephens Wurth Frazer and Torbet LLPMs. Susan Woo 135 South State College Blvd, Suite 300Brea, CA 92821Tel: (714) 990 1040Email: swoo@mswft.com