Shaanxi Auto, a minor automaker in China, is teaming up with the CNOOC Gas and Power Group on a liquefied natural gas (LNG) heavy-duty truck business, the 21st Century Business Herald reported this week.

Under their cooperation deal, Shaanxi Auto will be developing LNG heavy-duty trucks for long-distance transportation providers, while CNOOC Gas and Power is expected to build LNG stations along the running routes to ensure LNG supply for the trucks.

The two companies said that LNG vehicle technologies are mature now and they hope to gain the first-mover advantage in the LNG vehicle market. Shaanxi Auto is applying to industry regulators to include LNG heavy-duty trucks into the central government's new-energy vehicle subsidy program.

Natural gas vehicles are predicted to account for 30% of the total vehicles in China by 2020. The biggest challenges for natural gas vehicle development are gas supply and future price changes, as under government control natural gas may lose its price advantage over petroleum, said an industry executive.

The CNOOC Gas and Power Group is a wholly-owned subsidiary of the CNOOC Group, China's biggest offshore oil producer, which is also the parent company of CNOOC Ltd. The group has also signed a deal with Yancheng city of Jiangsu province to invest 12 billion yuan in building an LNG terminal.