10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-QSB

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2007

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to 

Commission File number 000-51364

SINO GAS INTERNATIONAL HOLDINGS, INC.

(Exact name of registrant as specified in charter)

Utah	32-0028823
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

No.18 Zhong Guan Cun Dong St.

Haidian District

Beijing, P. R. China 100083

(Address of principal executive offices)

011-86-10-82600527

Issuer’s telephone number

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x   No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No x

As of August 17, 2007, the Company had 16,423,360 shares of its common stock, par value $.001 per share, outstanding.

Transitional Small Business Disclosure Format:

Yes o  No x

Table of Contents

PART I. - FINANCIAL INFORMATION
Item 1.
Financial Statements	1
Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.
Controls and Procedures	29
PART II. - OTHER INFORMATION
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 5.
Other Information	29
Item 6.
Exhibits	30
Signatures	31

PART I

Item 1.Financial Statements

SINO GAS INTERNATIONAL HOLDINGS, INC.

UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007 AND 2006

(Stated in US dollars)

SINO GAS INTERNATIONAL HOLDINGS, INC.

CONTENTS	PAGES
REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM	1
CONSOLIDATED BALANCE SHEETS	2 - 3
CONSOLIDATED STATEMENTS OF INCOME	4
CONSOLIDATED STATEMENTS OF CASH FLOWS	5
NOTES TO FINANCIAL STATEMENTS	6 - 15

Board of Directors and Stockholders

Sino Gas International Holdings, Inc.

Report of Registered Independent Public Accounting Firm

We have reviewed the accompanying interim consolidated balance sheetsof Sino Gas International Holdings, inc. as of June 30, 2007 and December 31, 2006, and the related consolidated statements of income for the six months and the year then ended and cash flows for the six-month and three-month periods then ended. These interim consolidated financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

South San Francisco, California	Samuel H. Wong & Co., LLP
August 3, 2007	Certified Public Accountants

1

SINO GAS INTERNATIONAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

AT JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

	Notes	June 30, 2007		December 31, 2006
ASSETS
Current assets
Cash and cash equivalents		$	6,653,639	$	3,638,673
Restricted cash			-		3,124,541
Notes receivable			1,031,503		477,390
Accounts receivable			5,064,425		6,534,740
Inventory			57,690		-
Advances to suppliers			1,063,674		68,309
Prepayments and others			122,344		141,878
Other receivables			1,834,598		1,263,800
Total current assets		$	15,827,873	$	15,249,331
Long term assets
Investments in equity securities			3,087,297		2,939,029
Plant and equipment, net			14,645,720		10,608,530
Construction in progress			7,444,513		4,628,076
Intangible assets			307,108		457,830
Goodwill			112,750		-
TOTAL ASSETS		$	41,425,261	$	33,882,796
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Bank Loans		$	2,623,020	$	2,430,445
Accounts payable			6,794,401		3,891,388
Other payables			1,295,103		1,790,500
Unearned revenue			840,221		37,760
Accrued liabilities			135,705		325,922
Total current liabilities		$	11,688,450	$	8,476,015
Minority interest			65,575		-
TOTAL LIABILITIES		$	11,754,025	$	8,476,015

See accompanying notes to financial statements and accountant’s report

2

SINO GAS INTERNATIONAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (Continued)

AS OF JUNE 30, 2007 AND DECEMBER 31,2006

(Stated in US Dollars)

	Notes	2007		2006
STOCKHOLDERS’ EQUITY
Preferred Stock A US$0.001 par value; 20,000,000 authorized; nil and nil issued and outstanding as of June 30, 2007 and December 31, 2006 respectively			-		-
Preferred Stock B US$0.001 par value; 5,000,000 authorized; 3,387,446 and 4,023,268 issued and outstanding as of June 30, 2007 and December 31, 2006 respectively		$	3,387	$	4,023
Common Stock US$0.001 par value; 250,000,000 authorized; 16,423,360 and 14,692,647 issued and outstanding as of June 30, 2007 and December 31, 2006 respectively			16,423		14,693
Additional paid-in-capital			14,655,841		12,069,176
Statutory reserves			2,269,315		2,025,022
Retained earnings			11,089,768		10,469,571
Accumulated other comprehensive income			1,636,502		824,296
		$	29,671,236	$	25,406,781
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	41,425,261	$	33,882,796

See accompanying notes to financial statements and accountant’s report

3

SINO GAS INTERNATIONAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

		Six months ended June 30,						Three months ended June 30,
	Notes	2007			2006			2007			2006
Net revenues		$	5,234,372		$	1,499,540		$	2,796,145		$	841,276
Cost of revenues			3,731,833			983,487			1,894,203			463,800
Gross profit			1,502,539			516,053			901,942			377,476
Operating expenses
Selling and marketing expenses			199,494			26,825			143,296			16,622
General and administrative expenses			688,859			253,820			247,485			136,677
Income from continuing operations		$	614,186		$	235,409		$	511,161		$	224,177
Finance costs, net			33,550			(3,142	)		38,920			(3,056	)
Other income			11,781			43,465			(24,307	)		43,465
Other expenses			(11,977	)		(2	)		(10,482	)		(2	)
Income before taxation		$	647,540		$	275,730		$	515,292		$	264,585
Income tax			27,343			17,587			10,478			16,584
Net income		$	620,197		$	258,142		$	504,814		$	248,001
Net income per share,
Basic		$	0.04		$	0.02		$	0.03		$	0.02
Diluted		$	0.03		$	0.02		$	0.03		$	0.02
Weighted average shares outstanding
of common stock,
Basic			15,216,279			14,361,646			15,273,626			14,361,646
Diluted			19,486,791			14,361,646			19,360,386			14,361,646

See accompanying notes to financial statements and accountant’s report

4

SINO GAS INTERNATIONAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTHS AND THREE-MONTHS ENDED JUNE 30, 2007 AND 2006

(Stated in US Dollars)

	Six months ended June 30,						Three months ended June 30,
	2007			2006			2007			2006
Cash Flows from Operating Activities
Net income	$	620.197		$	258,142		$	504,814		$	248,050
Depreciation and Amortization		696,453			65,154			657,609			32,188
(Increase)/decrease in accounts and other receivables		(630,427	)		2,562,340			(940,846	)		1,293,092
(Increase) in inventories		(57,690	)		(12,899	)		(57,690	)		(12,899	)
Increase/(decrease) in accounts and other payables		3,019,392			(908,689	)		532,069			147,155
Net cash provided by operating activities	$	3,648,392		$	1,964,049		$	532,069		$	1,707,587
Cash Flows from Investing Activities
Purchase of plant and equipment	$	(4,733,643	)	$	(2,117,412	)	$	(1,412,955	)	$	(2,066,095	)
Restricted Cash		3,124,541			-			-			-
Payment for the construction in progress		(2,816,436	)		-			(1,471,000	)		151,996
Payment of cost of intangible assets		307,163			(5,678	)		479,373			(10,871	)
Acquisition of subsidiaries		(173,167	)		(27,854	)		757,634			(27,854	)
Increase in minority interest		65,575			-			65,575			-
Net Cash Used in Investing Activities	$	(4,225,967	)	$	(2,150,944	)	$	(1,646,948	)	$	(1,952,824	)
Cash Flows from Financing Activities
Repayment of Bank borrowings		192,575			-			2,623,020			-
Issue of share capital		2,587,759			-			2,587,759			-
Net Cash Provided by Financing Activities	$	2,780,334		$	-		$	5,210,779		$	-
Net in Cash & Cash Equivalents Sourced/(Used)	$	2,202,760		$	(186,895	)	$	4,095,900		$	(245,237	)
Effect of foreign currency translation on Cash & Cash equivalents		812,206			(27,121	)		212,575			1,452
Cash & Cash Equivalents at Beginning of Period		3,638,673			907,667			2,345,164			937,436
Cash & Cash Equivalents at End of Period	$	6,653,639		$	693,651			6,653,639		$	693,651
Supplementary cash flow information:
Interest received	$	98,584		$	-		$	3,931		$	-
Interest paid		54,610			3,142			10,993			3,056
Income tax paid		27,343			17,587			10,478			16,584

See accompanying notes to financial statements and accountant’s report

5

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Sino Gas International Holdings, Inc. (“the Company”) was incorporated under the laws of the State of Utah on August 19, 1983 as Evica Resources, Inc. The Company changed its name to American Arms, Inc. on April 5, 1984, and then changed its name to Dolce Ventures, Inc. on May 21, 2002, and ultimate changed its name to Sino Gas International Holdings, Inc. on November 17, 2006.

On September 7, 2006, the Company underwent a reverse-merger with Gas Investment China Ltd. (“GIC”), an International Business Company incorporated in the British Virgin Islands, and its wholly-owned subsidiaries, involving an exchange of shares whereby the Company issued an aggregate of 14,599.942 shares to the shareholders of GIC in exchange for all of the issued and outstanding shares of GIC. For financial reporting purposes, this transaction is classified as a recapitalization of Sino Gas International Holdings, Inc. and the historical financial statements of Gas Investment China Co. Ltd.

The Company is a natural gas services operator, principally engaging in the investment, operation and management of city gas pipeline infrastructure, in the distribution of natural gas to residential and industrial users, in the construction and operation gas stations, and in the development and application of natural gas related technologies. The Company owns and operates 23 natural gas distribution systems serving approximately 63,000 residential and eight commercial and industrial customers. The Company’s facilities include approximately 700 kilometers of pipeline and delivery networks with a designed daily capacity of approximately 70,000 cubic meters of natural gas.

The common stock of the Company is currently quoted on the National Association of Securities Dealers' Over-the-Counter Bulletin Board under the symbol “SGAS.”

Basis of Presentation and Organization

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

This basis of accounting differs in certain material respects from that used for the preparation of the books of account of the Company’s principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the PRC (“PRC GAAP”) or in the accounting standards used in the places of their domicile. The accompanying consolidated financial statements reflect necessary adjustments not recorded in the books of account of the Company’s subsidiaries to present them in conformity with US GAAP.

6

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Method of Accounting

The Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.

(b) Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

(c) Economic and political risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(d) Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries (“the Group”). Significant inter-company transactions have been eliminated in consolidation. Investments in which the company has a 20 percent to 50 percent voting interest and where the company exercises significant influence over the investor are accounted for using the equity method.

7

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

The Company owned its subsidiaries soon after its inception and continued to acquire and own the equity interests throughout the reporting periods. The following table depicts the identities of the consolidating subsidiaries as of June 30, 2007 and 2006 (whichever applicable 2006).

Name of Company	Place of Incorporation	Date of Incorporation	Beneficiary interest %	Equity Interest %	Registered Capital
GAS Investment China Co., Ltd.	The British Virgin Islands	6/19/2003	100	100	USD 10,000,000
Sino Gas Construction Limited	The British Virgin Islands	1/9/2007	100	100	USD 50,000
Pegasus Tel, Inc.	Delaware, U.S.A.	2/19/2002	100	100	USD 1,000
Beijing Zhong Ran Wei Ye Gas Co., Ltd	PRC	8/29/2001	100	100	RMB 94,448,517
Ningjin Weiye Gas Co., Ltd	PRC	12/3/2003	100	95	RMB 3,000,000
Jinzhou Weiye Gas Co., Ltd	PRC	7/19/2004	100	95	RMB 5,000,000
Xingtang Weiye Gas Co., Ltd	PRC	2/18/2004	100	95	RMB 3,000,000
Linzhang Weiye Gas Co., Ltd	PRC	7/6/2005	100	85	RMB 1,000,000
Anping Weiye Gas Co., Ltd	PRC	8/4/2005	100	95	RMB 5,000,000
Wuqiao Gas Co., Ltd	PRC	6/30/2004	100	95	RMB 2,000,000
Yutian Zhongran Weiye Gas Co.,Ltd	PRC	12/19/2003	100	90	RMB 3,000,000
Sihong Weiye Gas Co., Ltd	PRC	12/3/2004	100	95	RMB10,000,000
Langfang Development Region Weiye Dangerous Goods Transportation Co., Ltd	PRC	3/22/2005	100	95	RMB 1,000,000
Peixian Weiye Gas Co., Ltd	PRC	8/22/2005	100	90	RMB 5,000,000
Sishui Weiye Gas Co., Ltd	PRC	12/22/2004	100	95	RMB 3,000,000
LongyaoZhongranWeiyeGasCo.,Ltd	PRC	10/13/2005	100	95	RMB 3,000,000
Shenzhou Weiye Gas Co., Ltd	PRC	12/23/2005	100	95	RMB 3,000,000
Hengshui Weiye Gas Co., Ltd	PRC	12/20/2005	100	95	RMB 3,000,000
Changli Weiye Gas Co., Ltd	PRC	12/8/2006	100	95	RMB 3,000,000
Yuxian Jinli Gas Co., Ltd	PRC	11/8/2005	100	100	RMB 9,500,000
Zhangjiakou City Xiahuayuan Jinli Gas Co., Ltd.	PRC	9/30/2005	100	100	RMB 2,000,000
Beijing Chenguang Gas Ltd.	PRC	10/30/2002	100	100	RMB 20,000,000
Cheng'an County Chenguang Gas Co., Ltd	PRC	1/23/2007	100	100	RMB 1,500,000
Xinji County Zhongchen Gas Co., Ltd	PRC	2/7/2007	100	100	RMB 3,000,000
Tianjin Chenguang Gas Co., Ltd	PRC	3/7/2006	90	90	RMB 2,000,000

(e) Cash and Cash Equivalents

The Company considers all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents.

8

(f) Accounts and Other Receivable

Accounts and other receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. The Company extends unsecured credit to customers in the normal course of business and does not accrue interest on trade accounts receivable.

(g) Advances to Suppliers

Advances to suppliers represent the cash paid in advance for purchasing raw materials. The advances to suppliers are interest free and unsecured.

(h) Investments in Equity Securities

The consolidated statement of income includes the Group's share of the post-acquisition results of its associate for the year. In the consolidated balance sheet, investments in equity securities are stated at the Group's share of the net assets of the associates plus the premium paid less any discount on acquisition in so far as it has not already been amortized to the statement of income, less any identified impairment loss.

				Nominal
Name of	Place	Form of		Value of
Associate	of	Business	Registered	Registered	Principal
Company	Registration	Structure	Capital	Capital	Activities
Beijing Zhongran Xiangke Oil Gas Technology Co. Ltd	PRC	Sino-foreign equity joint venture	RMB 20,000,000	40	Trading of natural gas and gas pipeline construction

Beijing Zhongran Xiangke Oil Gas Technology Co. Ltd is the Group's 40% owned joint Venture company and is principally engaged in sale of compressed natural gas to domestic households and industrial around sub-urban areas of Beijing and part of sub-urban areas in Hebei Province and Tianjin.

(i) Accounting for the Impairment of Long-Lived Assets

The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

During the reporting periods, there was no impairment loss.

9

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

(j) Plant and Equipment

Plant and equipment, other than construction in progress, are stated at cost less depreciation and amortization and accumulated impairment loss.

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as follows:

Gas Pipelines	25 years
Motor Vehicles	10 years
Machinery & Equipment	20 years
Buildings	25 years
Leasehold Improvements	25 years
Office Equipment	8 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

(k) Intangible Assets

Intangible assets, are stated at cost less amortization and accumulated impairment loss. Amortization is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the intangibles are as follows:

Land use rights	40 - 50 years
Franchises	30 years
Other intangibles	3 years

(l) Construction in progress

Construction in progress represents the cost of constructing pipelines and is stated at cost. Costs comprise direct and indirect incremental costs of acquisition or construction. Completed items are transferred from construction in progress to the gas pipelines of fixed assets when they are ready for their intended use. The major cost of construction relates to construction materials, direct labor wages and other overhead. Construction of pipeline, through which to distribute natural gas, is one of the Group’s principal businesses. The Group builds city main pipeline network and branch pipeline network to make gas connection to resident users, industrial, and commercial users, with the objective of generating revenue on gas connection and gas usage fees collected from these customers. As at June 30, 2007, the pipelines under construction include mainly the projects in several cities of Hebei and Jiangsu province, and in Beijing. These projects, once completed, will significantly increase the gas supply capacity. Capital commitments in respect of these projects amounted to approximately $4 million at June 30, 2007.

10

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

(m) Unearned Revenue

Unearned revenue represents prepayments by customers for gas purchases and advance payments on construction and installation of pipeline contracts. The Company records such prepayment as unearned revenue when the payments are received.

(n) Financial Instruments

The carrying amounts of all financial instruments approximate fair value. The carrying amounts of cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these items. The carrying amounts of borrowings approximate the fair value based on the Company’s expected borrowing rate for debt with similar remaining maturities and comparable risk.

(o) Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The consolidated financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

	2007		2006
Months end RMB : US$ exchange rate		7.6248		7.8175
Average monthly RMB : US$ exchange rate		7.7230		7.9819

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

(p) Revenue Recognition

Revenue is recognized when services are rendered to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Net sales consist of gas and connection fee revenue. Cost of sales includes gas and connection cost.

Gas connection revenue is recognized when the outcome of a contract can be estimated reliably and the stage of completion at the balance sheet date can be measured reliably.

Sales of natural gas are recognized when goods are delivered and title has passed.

11

(q) Other Income

Other income represents the Group’s share of post- acquisition results of its investment in equity securities for the year.

(r) Income Taxes

Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2007, there was no significant book to tax differences.

Pursuant to the tax laws of PRC, general enterprises are subject to income tax at an effective rate of 33%. Beijing Gas is in the natural gas industry whose development is encouraged by the government. According to the income tax regulation, any company engaged in the natural gas industry enjoys a favorable tax rate. Also, Beijing Gas is exempt from corporate income tax for its first two years and is then entitled to a 50% tax reduction for the succeeding three years. The Company’s first profitable tax year was 2003. Accordingly, the Company’s income is subject to a reduced tax rate of 7.5%. From 2008 onwards, the Company’s income is subject to a reduced tax rate of 9%. Subsidiaries of Beijing Gas are subject to the effective rate of 33%.

(s) Advertising

The Group expensed all advertising costs as incurred

(t) Concentration of Credit Risk

Concentration of credit risk is limited to accounts receivable and is subject to the financial conditions of major customers. The Company does not require collateral or other security to support accounts receivable. The Company conducts periodic reviews of its clients’ financial condition and customers’ payment practices to minimize collection risk on accounts receivable.

(u) Retirement Benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the statements of income as incurred.

12

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

(v) Statutory Surplus Reserves

As stipulated by the Company Law of the People's Republic of China (PRC) as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i. Making up cumulative prior years' losses, if any;

ii. Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;

iii. Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and

iv. Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting.

(w) Statement of Cash Flows

In accordance with Statement of SFAS 95, “Statement of Cash Flows”, cash flows from the Company’s operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

(y) Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

13

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

(z) Recent Accounting Pronouncements

In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that the Company recognizes in its consolidated financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for the Company on January 1, 2007, with the cumulative effect of the change in accounting principle, if any, recorded as an adjustment to opening retained earnings.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, where fair value is the relevant measurement attribute. The standard does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.

In September 2006, the SEC issued SAB No. 108, which provides guidance on the process of quantifying financial statement misstatements. In SAB No. 108, the SEC staff establishes an approach that requires quantification of financial statement errors, under both the iron-curtain and the roll-over methods, based on the effects of the error on each of the Company’s financial statements and the related financial statement disclosures. SAB No.108 is generally effective for annual financial statements in the first fiscal year ending after November 15, 2006. The transition provisions of SAB No. 108 permits existing public companies to record the cumulative effect in the first year ending after November 15, 2006 by recording correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings.

The management of the Company does not anticipate that the adoption of these three standards will have a material impact on these consolidated financial statements.

3.CAPITALIZATION

Pursuant to an agreement entered into between the Company and Vision Opportunity Master Fund, Limited (the Investor) dated May 15, 2007, the Company agreed to modify the Series B Convertible Preferred Stock Purchase Agreement of September 7, 2006 which included the Series J Warrant to purchase 1,993,355 shares of common stock on or before September 7, 2007. The modification, in fact, created a new financing plan to the effect that (a) the original Series J warrant of 1,094,891 shares to be purchased on May 15, 2007 at a price of $2,74; (b) a new Series J Warrant to purchase 898,464 shares on or before September 7, 2007 at a price of $3.01 and (c) a new Series E Warrant to purchase 1,094,891 shares on or before May 15, 2012 at a price of $3.01.

As of June 30, 2007, the Company has received net proceeds of $2,587,759 for the issuance of 1,094,891 shares at $2.74 as a result of the exercise of Series J Warrant.

14

SINO GAS INTERNATIONAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2007 AND DECEMBER 31, 2006

(Stated in US Dollars)

Gross Proceeds: 1,094,381 shares at $2.74	$	3,000,001
Less: Issuance Cost and Expenses		412,242
Net Proceeds:	$	2,587,759

Pursuant to Series B Convertible Preferred Stock Purchase Agreements dated September 7, 2006 and October 20, 2006, the Company agreed to issue warrant to each Series B Preferred Stock investor to purchase shares of common stock for a term of one year from the closing date.

Series of Warrant	Number of Shares		Exercise Price
Series A		3,387,446	$	3.84
Series B		1,693,723		5.48
Series C		3,083,588		4.22
Series D		1,541,794		6.03
Series E		1,094,891		3.01
Series J		1,989,697		3.01
		12,790,139

15

Item 2. Management’s Discussion and Analysis

The following discussion and analysis of the consolidated financial condition and results of operations of Sino Gas International Holdings, Inc. (“we,” “us” or the “Company”) should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this quarterly report. Because we conduct our operations through our subsidiary Beijing Zhong Ran Wei Ye Gas Co., Ltd. (“Beijing Gas”) and the subsidiaries of Beijing Gas in the People’s Republic of China (the “PRC”), the following discussion focuses on the operations of those companies.

FORWARD-LOOKING INFORMATION

This Management's Discussion and Analysis (“MD&A”) includes “forward-looking statements.” All statements, other than statements of historical fact, included in this MD&A regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside of the Company's control, that could cause actual results to materially differ from those predicted by such statements. While we believe that the assumptions concerning future events are reasonable, we caution that there are inherent risks and difficulties in making these predictions, especially those arising out of our limited operating history, any failure on our part to compete effectively, any inability we might have to fund our future capital expenditures and our possible inability to control our growth.

Overview

As measured by net revenue, net income, and the other categories of performance set forth below, our business enjoyed significant growth during the three- and six-month periods ended June 30, 2007.

16

· Net revenue increased 232% to $2,796,145 for the three months ended June 30, 2007 as compared to $841,276 for the same period in 2006. Net revenue increased 249% to $5,234,372 for the six months ended June 30, 2007 as compared to $1,499,540 for the same period in 2006.

· Net income increased 95% to $504,814 during the three month period ended June 30, 2007 from $248,001 in the same period in 2006. Net income increased 140% to $620,197 during the six month period ended June 30, 2007 from $258,142 in the same period in 2006.

Due to the seasonal nature of our business, the second quarter of the calendar year is not traditionally our strongest. Construction of pipelines and gas stations begins again during this quarter, after being largely inactive in the preceding quarter due to the cold weather in the northern PRC, where most of our operations are located. The bulk of the revenue from these operations, however, is not generated until later in the year, when further stages of the construction process have been completed. Given this seasonal pattern, management believes that our strong growth in the second quarter, as measured by net revenue and the other metrics described below, may continue and lead to potentially stronger growth, by the same metrics, during the second half of 2007.

The stronger performance during the quarter ended June 30, 2007 as compared with the same period last year is due to our strategic acquisitions and new construction at existing project locations, which have resulted in a larger customer base. During the three months ended June 30, 2007, we constructed natural gas pipeline connections to 4,336 residential households, as compared to 1,094 new household connections during the same period in 2006. As of June 30, 2007, our distribution network included approximately 70,000 connected users, compared with 25,000 connected users one year earlier.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006

Net Revenue

We generate revenue from two sources: connection fees for constructing connections to our natural gas distribution network, and sales of natural gas. Total net revenue for the three months ended June 30, 2007 was $2,796,145, compared to $841,276 for the same period in 2006, representing an increase of 232%. The increase was due to increases in new connections of customers to our gas distribution network and in the number of customers purchasing natural gas. During this period, we connected 4,336 new residential households to our gas distribution network, resulting in total connection fees of $1,349,377. Gas sales during the period amounted to 4,500,880 cubic meters, or $1,425,609.

17

The following table summarizes our net revenue during the periods indicated:

( $ thousand)	For the 3 months ended June 30,
	2007			2006		Change
	US$	%		US$	%	%
Total Revenue	2,796.1	100%		841.3	100%	232%
Connection Fees	1,349.4	48%		239.8	29%	463%
Gas Sales	1,425.6	51%		601.5	71%	137%
Others	21.1	1%				N/A

Connection fees

Connection fees during the quarter ended June 30, 2007 were $1,349,377, representing an increase of more than 460% from $239,797 in the same quarter last year. Connection fees accounted for approximately 50% of total revenue during the quarter, compared with approximately 28.5% for the same period in 2006.

Excluding Beijing Chenguang Gas Co., Ltd. (“Beijing Chenguang”), which we acquired in January 2007, connection fees from our previously existing operating locations were $1,126,000, which includes new connections for 3,949 households. Connection fees during the quarter were relatively low compared with prior periods, as our connection operations were principally focused on last year’s remaining projects and early development of some newer projects.

Beijing Chenguang connected 387 new household users in the three months ended June 30, 2007, which contributed $223,400 to our total connection fees. The higher connection fees per household for Beijing Chenguang are due to the development of a luxury residential area, Dongfang Taiyangcheng, which resulted in significantly higher connection fees than for typical residential areas.

All connection fees during the second quarter of 2007 came from our residential customers.

The table below provides information about our four largest customers for connection fees during the quarter ended June 30, 2007:

Residential Projects		Connected Households		Connection Fees ($ in Thousands)
Jiangsu Peixian Datun		2,500		756
Beijing Chenguang Dongfang Taiyangcheng		76		64
Hebei Xinhe Longyuan		225		58
Anhui Wuhe		200		54

18

Gas sales

We sold 4,508,800 cubic meters of natural gas to our customers during the quarter ended June 30, 2007, contributing $1,425,609, or 51% of total net revenue. In comparison, gas sold in the same quarter of 2006 totaled 2,000,000 cubic meters, contributing $601,500, or 71.5%, of net revenue. Gas sales increased $824,109, or 137%, from the same period one year ago. Gas sales in the quarter ended June 30, 2007 were generated by our previously existing projects, which, excluding the recently-acquired Beijing Chenguang, generated $352,900 in gas sales, an increase of 57% from the same period one year ago. Beijing Chengguang generated $471,200 in gas sales. Of the gas sold by Beijing Chengguang, gas sold to residential customers amounted to $66,000 and gas sold to industrial customers amounted to $405,200.

The following table summarizes our gas sales during the periods indicated:

($ thousand)	For the 3 months ended June 30,
	2007		2006
Gas Sales	US$	%	US$	%
Industrial users	708.2	50%	365.4	61%
Residential users	342.0	24%	108.1	18%
Others	375.4	26%	128.0	21%
Total	1,425.6	100%	601.5	100%

We sell natural gas to industrial, residential, and commercial customers. During the three months ended June 30, 2007, sales to industrial customers generated $708,200 of natural gas sales, sales to residential customers generated $342,000, and sales to commercial customers generated $375,400. These sales represent increases in sales to industrial customers of 93.8%, to residential customers of 216.4%, and to commercial customers of 193.3%, compared with sales to such customers of $365,400, $108,100, and $128,000, respectively, in the same quarter of 2006.

The table below provides information about our three largest customers for natural gas (all of which are industrial customers that supply gas to residential developments):

Residential Projects		Gas Sales (M³)		Gas Sales ($1,000)
Hebei Zhonggang		2,001		599
Hebei Tangshan Changsheng		275		81.7
Langfang Elite		99.5		27.4

19

The average price of gas sold to these industrial customers was $0.31 per cubic meter. Hebei Zhonggang is currently our largest industrial user, with daily gas consumption exceeding 20,000 cubic meters, or approximately 30% of our total daily gas consumption. Residential customers pay gas fees using a prepaid “smart card.”

Other Revenue

During the three months ended June 30, 2007, we also generated $21,159 in revenue from the lease of our natural gas delivery and storage facilities through our subsidiary Beijing Chenguang.

Cost of Revenue

Our cost of revenue, which includes cost of connection fees and cost of natural gas sales, was $1,809,800 for the three month period ended June 30, 2007. (This figure does not include the payment of local taxes of approximately $84,200, which were later refunded to us.)

The table below sets forth our cost of revenues for the periods indicated:

($ thousands)	For the 3 months ended June 30,
	2007		2006
	US$	%	US$	%
Cost of Sales	1,809.8	100%	463.8	100%
Connection Cost	431.8	24%	33.5	7%
Gas Cost	1,378	76%	430.3	93%

Cost of Connections

Our cost of connection fees during the quarter ended June 30, 2007 was $431,800 or 24% of total cost of revenue. By comparison, the cost of connection fees during the same quarter of 2006 was $33,500, or 7.22% of total cost of revenue. The significant increase in cost of connection fees is due to both the expansion of our operations and the increased cost of gas station maintenance resulting from the development of our gas stations.

Cost of connection fees includes depreciation of major pipelines, the cost of courtyard pipelines, valves, gas meters, and installation and maintenance fees.

Cost of Natural Gas Sales

The cost of natural gas sales increased 220% from the quarter ended June 30, 2006, when it was $430,300 and 92.78% of total cost of revenue, to the quarter ended June 30, 2007, when it was $1,378,000 and 76% of total cost of revenue. This increase, which outpaced the 137% increase in sales of natural gas during the same interval, is largely due to the addition of gas delivery trucks acquired for approximately RMB 12 million ($1.58 million), the depreciation of which added to our cost of natural gas sales. We believe that the impact of that depreciation will be gradually reduced as our business and customer base grow.

20

The cost of natural gas sales includes the purchase and transportation of natural gas and depreciation of delivery trucks. The purchase price that gas distributors pay for natural gas, which is determined by the PRC government, is approximately RMB 1.6 to 1.9 ($0.21 to $0.25) per cubic meter. Langfang Development Zone Wei Ye Dangerous Goods Transportation Co. Ltd, one of our subsidiaries, is responsible for our gas transportation, and transportation cost per cubic meter is relatively constant at RMB 0.55 ($0.072) per cubic meter. Management believes that this transportation cost per cubic meter is likely to remain constant in spite of the increased depreciation costs from the newly purchased vehicles described above, because the vehicles will allow delivery of additional natural gas to customers sufficient to offset those costs

Our biggest natural gas supplier is the North China Oil Field Fourth Oil Extraction Plant of Petro China Company, with whom we signed a ten-year gas supply agreement in 2003. We purchased 3,387,600 cubic metersof natural gas from Petro China at the price of RMB 1.55 ($0.204) per cubic meter. At the beginning of each year in the ten-year contract period, we negotiate with Petro China on the price and supply amount according to market conditions. In 2007, Petro China will supply a total of 10 million cubic meters of natural gas at RMB 1.55 ($0.204) per cubic meter between April 1 and October 31 and RMB 1.65 ($0.217) per cubic meter during the rest of the year.

Gross Profit

During the quarter ended June 30, 2007, gross profit was $965,200, an increase of approximately 130% from the same quarter of 2006. Gross profit from connection fees increased 345% to $917,600, from $206,000 in the same quarter of 2006. Gross profit from gas sales was $47,600, as compared to $171,100 in the same quarter of 2006.

Gross margin for connection fees for the quarter ended June 30, 2007 was 68%. Because we typically recognize most of our connection fees in the fourth quarter, we believe it is likely that gross margins for connection fees will return to previous levels of 70% to 75% in the second half of 2007. Gross margin for sales of natural gas was 3.4% during the quarter ended June 30, 2007, compared with 6% in the same quarter of 2006 due to the relatively higher depreciation levels described above. Management also believes that this margin is likely to return to previous higher levels of approximately 10% as we distribute gas to an increasing number of gas users connected to our distribution networks.

Selling and marketing expenses

Our selling expenses in the quarter ended June 30, 2007 were $143,300 and equaled approximately 5% of our net sales, compared with $16,622 and less than 2% of net sales in the second quarter of 2006. This substantial increase was principally due to increases in marketing-related fees, including travel and communications.

21

General and administrative expenses

General and administrative expenses were $247,500 for the three months ended June 30, 2007, or 81% higher than $136,677 in the same period one year ago. The increase is largely due to the increase in the number of operating subsidiaries we own, from 13 to 20, leading to increases in salary, social insurance, traveling expenses and other expenses. The increase is also due in part to increased depreciation relating to new assets described above.

As a percentage of net sales, general and administrative expenses equaled 8.8% of our net sales in the second quarter of 2007, compared with 16.3% in the same period one year ago. The reduction in general and administrative expenses relative to net sales is, we believe, due to economies of scale that have been achieved by the expansions of our business described above.

Income from Continuing Operations

Income from continuing operations in the second quarter of 2007 was $511,161, representing an increase of $287,000, or 128%, from $224,177 in the same period last year. The increase in Income from continuing operations is due primarily to the increase in net sales described above.

Income Tax

For 2007, the income tax rate applicable to Beijing Gas, the main subsidiary of Sino Gas in China, is 7.5%. Beijing Gas is classified as a foreign high-tech enterprise by the tax regulatory authority, and therefore has enjoyed a favorable tax rate for the past five years, with an income tax rate of zero in 2004 and 2005 and 7.5% from 2005 to 2007.

The income tax rate of our subsidiaries is 33%, except for Beijing Chenguang, which has also been classified as a foreign high-tech enterprise and is subject to the favorable income tax rate of 7.5% from 2006 to 2008.

The income tax accrued during the three month period ended June 30, 2007 was $10,478, lower than the $16,584 accrued during the same period in 2006, due to a refund of 2005 taxes from the tax bureau.

Net Income

Net income in the second quarter of 2007 was $504,814, representing an increase of 104% from $248,001 in the same period in 2006. The increase can be attributed to the continuous growth of our existing markets and the acquisition of Beijing Chenguang. Due to the seasonal nature of our business, management believes it is likely that net income will increase substantially in the second half of 2007.

22

Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

Net Revenue:

Total net revenue for the six-month period ended June 30, 2007 was $5,234,372, representing an increase of 249% from $1,499,540 for the same period in 2006. The increase was due to the increase of new connections and gas users. During this period, we added 6,586 new residential households, resulting in total connection fees of $1,964,713. Gas sales amounted to 11,734,384 cubic meters, or $3,248,500.

The following table summarizes our net revenue for the periods indicated:

$ thousand	Six Months Ended June30, 2007		Six Months Ended June 30, 2006		Change
	US$	% of Net Revenue	US$	% of Net Revenue	%
Net Revenue	5,234.3	100%	1,499.5	100	249%
Connection Fees	1,964.7	37.5%	358.6	23.9%	448%
Gas Sales	3,248.5	62%	1,140.9	76.1%	185%
Others	21.1	0.5%			N/A

Connection Fees

Connection fees during the six month period ended June 30, 2007 were $1,964,713, representing an increase of more than 440% from $358,657 for the same period in 2006. Connection fees accounted for approximately 38% of total net revenue during the six month period ended June 30, 2007, compared to 24% for the same period in 2006.

Excluding Beijing Chenguang, which we acquired in January of this year, connection fees during the six month period ended June 30, 2007 were approximately $1,491,347, resulting from the connection of 5,099 new residential households to our gas distribution network, as compared to $358,657 for the same period in 2006, resulting from the connection of 1,560 new residential households.

Beijing Chenguang connected 1,487 new residential households during the six months ended June 30, 2007, which contributed approximately $473,366 to our total connection fees. All of our connection fees for the six month period ended June 30, 2007 were from the connection of residential customers.

The table below provides information about our four most significant customers for connection fees during the six months ended June 30, 2007:

Residential Projects		Connected Households		Connection Fees ($ in Thousands)
Jiangsu Peixian Datun		2,780		756.3
Shijiangzhuang Jinshi		660		161.7
Hebei Dinghua		438		107.8
Beijing Ying Group		417		103.5

23

Gas sales

Gas sales to our customers were $3,248,500 (for 11,734,384 cubic meters of natural gas) during the six month period ended June 30, 2007, representing 62%, of total net revenue for that period. Gas sales during the six month period ended June 30, 2006 were $1,140,883 (for 3,900,637 cubic meters), representing 76% of the total net revenue. Gas sales increased $2,107,617, or 185%, from the same period in 2006, due to our previously existing projects (excluding Beijing Chenguang), which generated $1,1912,744 in gas sales, an increase of 68% from the same period in 2006. Beijing Chenguang sold 5,097,431 cubic meters, or $1,335,756, of gas during the period, of which sales to residential customers amounted to $169,871 and sales to industrial customers amounted to $1,174,885.

The table below summarizes our gas sales for the periods indicated:

($’s in thousands)	For the Six Month Period ended June 30
	2007		2006
Gas Sales	US$	%	US$	%
Main Industrial users	803.5	25%	194.6	17%
Residential users	1,149.8	35%	829.7	73%
Others industrial and commercial	1,295.2	40%	116.5	10%
Total	3,248.5	100%	1,140.8	100%

For the six months ended June 30, 2007, sales of natural gas to industrial customers were $1,149,756, sales to residential customers were $803,515, and sales to commercial and industrial customers were $3,248,500. In comparison, during the six month period ended June 30, 2006, we had natural gas sales of $829,706 to industrial customers, $194,628 to residential customers and $116,548 to commercial and other users.

The table below lists our three largest natural gas customers during the six months ended June 30, 2007, all of which are industrial customers:

Residential Projects		Gas Sales (M³)		Gas Sales ($1,000)
Hebei Zhonggang		3,332,813		992,035
Hebei Sanhe yanshen		2,834,132		756,793
Shunxin Yangguang		847,523		203,757
Tangshan Changsheng		436,232		130,286

24

Hebei Zhonggang was our largest industrial customer, with daily gas consumption in excess of 20,000 cubic meters. Residential customers purchase gas using a prepaid “smart card.”

Other Revenue

We have revenue of $21,159 from the lease of our delivery and storage facilities through our subsidiary Beijing Chenguang.

Cost of Revenue

Our cost of revenue, which includes cost of connection fees and cost of natural gas sales, was $3,647,501 for the six month period ended June 30, 2007. Cost of connection fees was $556,262 and cost of natural gas sales was $3,091,239 during the period.

The table below summarizes our cost of revenue during the periods indicated:

	For the Six Month Period ended June 30
	2007		2006
	US$	%	US$	%
Cost of revenue	3,647,501	100%	983,487	100%
Connection Cost	556,262	15.3%	64,215	7%
Gas Cost	3,091,239	84.7%	919,272	93%

Cost of Connections

Cost of connection fees during the six month period ended June 30, 2007 was $556,262, which represented 15.3% of our total cost of revenue during the period. Cost of connection fees during the six month period ended June 30, 2006 was $33,500, which represented 7.22% of the total cost of revenue during that period. The significant increase in cost of connection fees is due to both the expansion of our operations and the increased cost of gas station maintenance resulting from the development of our gas stations.

Cost of connection fees includes depreciation of major pipelines, the cost of courtyard pipelines, valves, gas meters, and installation and maintenance fees.

25

Cost of Natural Gas Sales

The cost of natural gas sales in the six month period ended June 30, 2007 was $3,091,239, which represented 84.7% of the total cost of revenue during the period. The cost of natural gas sales for the six month period ended June 30, 2006 was $919,272, which represented 93% of the total cost of revenue during that period. Cost of natural gas sales increased 236% from the six month period ended June 30, 2006. This increase, which outpaced the 185% increase in sales of natural gas during the same interval, is largely due depreciation on gas delivery trucks that we purchased for approximately RMB 12 million ($1.58 million). We believe that the impact of that depreciation will be gradually reduced as our business and customer base grow.

The cost of natural gas sales includes the purchase and transportation of natural gas and depreciation of delivery trucks. The purchase price that gas distributors pay for natural gas, which is determined by the PRC government, is approximately RMB 1.6 to 1.9 ($0.21 to $0.25) per cubic meter. Langfang Development Zone Wei Ye Dangerous Goods Transportation Co. Ltd, one of our subsidiaries, is responsible for our gas transportation, and transportation cost per cubic meter is relatively constant at RMB 0.55 ($0.072) per cubic meter. Management believes that this transportation cost per cubic meter is likely to remain constant in spite of the increased depreciation costs from the newly purchased vehicles described above, because the vehicles will allow delivery of additional natural gas to customers sufficient to offset those costs.

Our biggest natural gas supplier is the North China Oil Field Fourth Oil Extraction Plant of Petro China Company, with whom we signed a ten-year gas supply agreement in 2003. We purchased 3,387,600 cubic metersof natural gas from Petro China at the price of RMB 1.55 ($0.204) per cubic meter. At the beginning of each year in the ten-year contract period, we negotiate with Petro China on the price and supply amount according to market conditions. In 2007, Petro China will supply a total of 10 million cubic meters of natural gas at RMB 1.55 ($0.204) per cubic meter between April 1 and October 31 and RMB 1.65 ($0.217) per cubic meter during the rest of the year.

Gross Profit

Gross profit for the six month period ended June 30, 2007 was $1,502,539, representing an increase of approximately 130% from $516,053 for the same period in 2006.

Gross profit from connection fees increased nearly 380% to $1,408,451, from $294,441 the same period in 2006. Gross profit from gas sales was $157,261, as compared to $221,611 for the same period in 2006. Gross margin from gas sales was 4.8% during the six month period ended June 30, 2007. Management believes it is likely that this number will increase as we acquire additional users.

Selling and Marketing Expenses

Selling and marketing expenses in the six month period ended June 30, 2007 were $199,494, compared with $26,825 in the six month period ended June 30, 2006. Selling expenses equaled 4% of our net sales for the six month period ended June 30, 2007 compared to 2% for the same period for the prior year. The increase was primarily due to the increase in the salaries, social insurance, traveling fees and communication fees of the marketing department.

26

General and administrative expenses

General and administrative expenses were $688,859 for the six months ended June 30, 2007, compared to $253,820 for the same period in 2006, representing an increase of 171%. General and administrative expenses equaled 13% of our net sales, compared with 17 % for the same period in 2006. The increase is largely due to the increase in the number of operating subsidiaries we own, from 13 to 20, leading to increases in salary, social insurance, traveling expenses and other expenses. The increase is also due in part to increased depreciation relating to new assets described above.

Income from Continuing Operations

Income from continuing operations for the six month period ended June 30, 2007 was $614,186, an increase of $378,777, or 161%, from $235,409 for the same period in 2006.

Income Tax

For 2007, the income tax rate applicable to Beijing Gas, the main subsidiary of Sino Gas in China, is 7.5%. Beijing Gas is classified as a foreign high-tech enterprise by the tax regulatory authority, and therefore has enjoyed a favorable tax rate for the past five years, with an income tax rate of zero in 2004 and 2005 and 7.5% from 2005 to 2007.

The income tax rate of our subsidiaries is 33%, except for Beijing Chenguang, which has also been classified as a foreign high-tech enterprise and is subject to the favorable income tax rate of 7.5% from 2006 to 2008.

The income tax accrued during the six month period ended June 30, 2007 was $27,343, compared to $17,587 for the six month period ended June 30, 2006.

Net Income

Net income for the six month period ended June 30, 2007 was $620,197, compared to $258.142 for the same period in 2006, representing an increase of 140%. The increase can be attributed to the continuous growth of our existing markets and the acquisition of Beijing Chenguang. Due to the seasonal nature of our business, management believes it is likely that net income will increase substantially in the remaining quarters of 2007.

Liquidity and Capital Resources

As of June 30, 2007, cash and cash equivalents were $6.65 million, an increase of $3.01 million from $3.64 million as of December 31, 2006, due to the increase in cash flow from operating and financing activities, partly offset by our investment activities.

27

For the first six months of 2007, cash flow from operations was $3.65 million, as compared to $530,000 in the same period one year ago.

There was a large increase in cash flow from financing activities during the first six months of 2007, as we raised $3 million in gross proceeds from our existing investors in May, 2007 through the exercise of warrants and we took out a one year loan in the amount of RMB 20 million (approximately $2.63 million), accruing interest at an adjustable rate (currently 6.0225% per year), with interest payable quarterly, from Industrial Bank, Beijing Branch. We used these funds for the development of new projects and acquisitions. During the quarter ended March 30, 2007, we repaid an RMB 20 million short-term loan from Shenzhen Development Bank.

Net cash outflow from investing activities for the six months ended June 30, 2007 was $4,225,967, representing an increase of $2.58 million from the same period last year, due to acquisitions and the connection of new users to our distribution networks.

Accounts Receivable

Accounts receivable as of June 30, 2007 were $5,064,400, representing a decrease of $1,407,300 from $6,534,700 as of December 31, 2006. This decrease is primarily due to our seasonal business cycle, in which many accounts receivable are recorded upon completion of construction projects in the fourth quarter, and are collected in the second quarter of the following year. The term of most of our accounts receivable is one year. As of the end of the second quarter, 90% of accounts receivable dated from 2005 had been collected, and the remainder were primarily warranty payments. A warranty payment is the final payment that a customer makes for a construction project. It consists of the final 10% of the total project cost, and it becomes payable one year after construction has been completed, provided that no significant problems with the construction have arisen during the year. Management believes that we are likely to collect most of the outstanding warranty payments from 2005 in the third quarter of 2007.

Because several important ongoing construction projects are scheduled for completion in the second half of 2007, we expect our accounts receivable to increase during that time.

Fixed assets:

Fixed assets as of June 30, 2007 were $14.6 million, an increase of $4 million from $10.6 million as of the end of fiscal 2006. The increase is primarily due to the acquisitions of fixed assets, most of which are pipelines, of Beijing Chengguang, valued at RMB 2,731,800. We also purchased containers used for gas delivery at a purchase price $409,700 during the quarter.

28

Accounts Payable

Accounts payable as of June 30, 2007 were $6.79 million, an increase of $2.9 million from the end of 2006. This increase is due primarily to our acquisition of Beijing Chenguang, in connection with which we are scheduled to make an additional payment of $2.09 million.

Item 3. Controls and Procedures

At the conclusion of the quarter ended June 30, 2007, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our officers concluded that, as of June 30, 2007, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported reliably and within the time periods specified in the applicable rules and forms and that such information is accumulated and communicated to our chief executive officer and chief financial officer in a manner that allows for timely decisions regarding required disclosure.

In the course of our evaluation, we did not discover any change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II

Item 2. Unregistered Sales of Securities

Please see the first paragraph under Item 5 of this report, which is incorporated into this Item by reference.

Item 5. Other Information

On May 15, 2007, we entered into a warrant exercise agreement with Vision Opportunity Master Fund, Ltd. (“Vision”), a holder of our Series J Warrants, pursuant to which, on the same date, Vision exercised Series J Warrants to purchase 1,094,891 shares of our common stock at a purchase price of $2.74 per share. In consideration of, and in order to provide incentive for, this exercise, which provided us with gross proceeds of $3,000,001, we issued to Vision Series E Warrants, with substantially the same terms as the exercised Series J Warrants, to purchase 1,094,891 shares of our common stock at a purchase price of $3.01 per share. At the same time, pursuant to our engagement agreement with Kuhns Brothers Securities, Inc., we issued to Kuhns Brothers, as a placement agent fee, Series G Warrants, with substantially the same terms as the exercised Series J Warrants, to purchase 109,489 shares of our common stock, or 10% of the shares issued to Vision.

29

Copies of the warrant exercise agreement, Series E Warrant and Series G Warrant are attached as exhibits to this report.

On April 12, 2007, we terminated our engagement agreement with Kuhns Brothers.

Item 6.Exhibits.

Exhibit List

No.  Description

3.1 Amended Articles of Incorporation.

3.2 Amended Bylaws. (1)

4.1 Series E Warrant.

4.2 Series G Warrant.

10.1 Warrant Exercise Agreement between the Company and Vision Opportunity Master Fund, Ltd.

31.1 Certification of Yuchuan Liu pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Fang Chen pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2006.

30

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SINO GAS INTERNATIONAL HOLDINGS, INC.
Date: August 17, 2007	By:	/s/ Chen Fang
		Chen Fang
		Director and Chief Financial Officer

31

EX-3.1

EX-4.1

  
    
      Unassociated Document





  
    

EX-4.2

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

SERIES G WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

SINO GAS INTERNATIONAL HOLDINGS INC.

Expires May 14, 2012

No.: W-G-07-01Number of Shares: 109,489

Date of Issuance: May 15, 2007

FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the undersigned, Sino Gas International Holdings, Inc., a Utah corporation (together with its successors and assigns, the "Issuer"), hereby certifies that Kuhns Brothers, Inc. or its registered assigns (the “Holder”) is entitled to subscribe for and purchase, during the Term (as hereinafter defined), up to One Hundred Nine Thousand Four Hundred Eighty Nine (109,489) shares (subject to adjustment as hereinafter provided) of the duly authorized, validly issued, fully paid and non-assessable common stock of the Issuer, at an exercise price per share equal to the Warrant Price then in effect on the terms and conditions hereinafter set forth. Capitalized terms used in this Warrant and not otherwise defined herein shall have the meanings specified in Section 8 hereof.

1.Term. The term of this Warrant shall commence on May 15, 2007 and shall expire at 6:00 p.m., eastern time, on May 14, 2012 (such period being the "Term").

2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.

(a)Time of Exercise. The purchase rights represented by this Warrant may be exercised in whole or in part during the Term for up to 109,489 shares of common stock of the issuer.

(b)Method of Exercise. The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the exercise form attached hereto as Exhibit A duly executed) at the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration therefor equal to the Warrant Price in effect on the date of such exercise multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder's election (i) by certified or official bank check or by wire transfer to an account designated by the Issuer, (ii) by "cashless exercise" in accordance with the provisions of subsection (c) of this Section 2, but only when a registration statement under the Securities Act providing for the resale of the Warrant Stock is not then in effect, or (iii) by a combination of the foregoing methods of payment selected by the Holder.

-1-

(c)Intentionally Omitted.

(d)Issuance of Stock Certificates. In the event of any exercise of the rights represented by this Warrant in accordance with and subject to the terms and conditions hereof, certificates for the shares of Warrant Stock so purchased shall be dated the date of such exercise and delivered to the Holder hereof within a reasonable time, not exceeding three (3) Trading Days after such exercise (the “Delivery Date”) or, at the request of the Holder (provided that a registration statement under the Securities Act providing for the resale of the Warrant Stock is then in effect), issued and delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonable time, not exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such exercise. The Holder shall deliver this original Warrant, or an indemnification undertaking with respect to such Warrant in the case of its loss, theft or destruction, at such time that this Warrant is fully exercised. With respect to partial exercises of this Warrant, the Issuer shall keep written records for the Holder of the number of shares of Warrant Stock exercised as of each date of exercise.

(e)Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Issuer fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Stock pursuant to an exercise on or before the Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of shares of Warrant Stock that the Issuer was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of shares of Warrant Stock for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Issuer timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Issuer shall be required to pay the Holder $1,000. The Holder shall provide the Issuer written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Issuer’s failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof.

-2-

(f)Transferability of Warrant. Subject to Section 2(h) hereof, this Warrant, and the rights evidenced hereby, may be transferred by a Holder, in whole or in part, without the consent of the Issuer. If transferred pursuant to this paragraph, this Warrant may be transferred on the books of the Issuer by the Holder hereof in person or by duly authorized attorney, upon surrender of this Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. This Warrant is exchangeable at the principal office of the Issuer for Warrants to purchase the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to purchase such number of shares of Warrant Stock as the Holder hereof shall designate at the time of such exchange. All Warrants issued on transfers or exchanges shall be dated the Original Issue Date and shall be identical with this Warrant except as to the number of shares of Warrant Stock issuable pursuant thereto.

(g)Continuing Rights of Holder. The Issuer will, at the time of or at any time after each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing the extent, if any, of its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such Holder shall fail to make any such request, the failure shall not affect the continuing obligation of the Issuer to afford such rights to such Holder.

(h)Compliance with Securities Laws.

(i)The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except pursuant to an effective registration statement, or an exemption from registration, under the Securities Act and any applicable state securities laws.

(ii)Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

-3-

(iii)The Issuer agrees to reissue this Warrant or certificates representing any of the Warrant Stock, without the legend set forth above if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer describing the manner and terms of such transfer and removal as the Issuer may reasonably request. Such proposed transfer and removal will not be effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that the registration of such securities under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Issuer with the Securities and Exchange Commission and has become effective under the Securities Act, (iii) the Issuer has received other evidence reasonably satisfactory to the Issuer that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the Holder provides the Issuer with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that registration or qualification under the securities or "blue sky" laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or "blue sky" laws has been effected or a valid exemption exists with respect thereto. The Issuer will respond to any such notice from a holder within three (3) Trading Days. In the case of any proposed transfer under this Section 2(h), the Issuer will use reasonable efforts to comply with any such applicable state securities or "blue sky" laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, or (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject. The restrictions on transfer contained in this Section 2(h) shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Warrant. Whenever a certificate representing the Warrant Stock is required to be issued to a the Holder without a legend, in lieu of delivering physical certificates representing the Warrant Stock (provided that a registration statement under the Securities Act providing for the resale of the Warrant Stock is then in effect), the Issuer shall cause its transfer agent to electronically transmit the Warrant Stock to the Holder by crediting the account of the Holder's Prime Broker with DTC through its DWAC system.

(i)Accredited Investor. In no event may the Holder exercise this Warrant in whole or in part unless the Holder is an “accredited investor” as defined in Regulation D under the Securities Act.

-4-

3.Stock Fully Paid; Reservation and Listing of Shares; Covenants.

(a)Stock Fully Paid. The Issuer represents, warrants, covenants and agrees that all shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise hereunder will, when issued in accordance with the terms of this Warrant, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by or through the Issuer. The Issuer further covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of the issuance upon exercise of this Warrant a number of authorized but unissued shares of Common Stock equal to at least one hundred percent (100%) of the number of shares of Common Stock issuable upon exercise of this Warrant without regard to any limitations on exercise.

(b)Reservation. If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any Governmental Authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its best efforts as expeditiously as possible at its expense to cause such shares to be duly registered or qualified. If the Issuer shall list any shares of Common Stock on any securities exchange or market it will, at its expense, list thereon, and maintain and increase when necessary such listing, of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder (provided that such Warrant Stock has been registered pursuant to a registration statement under the Securities Act then in effect), and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock shall be so listed. The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the same class shall be listed on such securities exchange or market by the Issuer.

(c)Covenants. The Issuer shall not by any action including, without limitation, amending the Articlesof Incorporation or the by-laws of the Issuer, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment. Without limiting the generality of the foregoing, the Issuer will (i) not permit the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision of the Articlesof Incorporation or by-laws of the Issuer in any manner that would adversely affect the rights of the Holders of the Warrants, (iii) take all such action as may be reasonably necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Warrant, and (iv) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant.

-5-

(d)Loss, Theft, Destruction of Warrants. Upon receipt of evidence satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same number of shares of Common Stock.

(e) Payment of Taxes. The Issuer will pay any documentary stamp taxes attributable to the initial issuance of the Warrant Stock issuable upon exercise of this Warrant; provided, however, that the Issuer shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates representing Warrant Stock in a name other than that of the Holder in respect to which such shares are issued.

4.Adjustment of Warrant Price. The price at which such shares of Warrant Stock may be purchased upon exercise of this Warrant shall be subject to adjustment from time to time as set forth in this Section 4. The Issuer shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 4 in accordance with the notice provisions set forth in Section 5.

-6-

(a)Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale.

(i) In case the Issuer after the Original Issue Date shall do any of the following (each, a "Triggering Event"): (a) consolidate or merge with or into any other Person and the Issuer shall not be the continuing or surviving corporation of such consolidation or merger, or (b) permit any other Person to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving Person but, in connection with such consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged for Securities of any other Person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any other Person, or (d) effect a capital reorganization or reclassification of its Capital Stock, other than any event set forth in Section 4(b) below, then, and in the case of each such Triggering Event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to the extent this Warrant is not exercised prior to such Triggering Event, to receive at the Warrant Price in effect at the time immediately prior to the consummation of such Triggering Event in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering Event, the Securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by this Warrant immediately prior thereto (including the right of a shareholder to elect the type of consideration it will receive upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 4. Notwithstanding anything in the foregoing to the contrary, this Section 4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering Event is a company that has a class of equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock is listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board. In the event that the surviving entity pursuant to any such Triggering Event is not a public company that is registered pursuant to the Securities Exchange Act of 1934, as amended, or its common stock is not listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, then the Holder shall have the right to demand that the Issuer pay to the Holder an amount in cash equal to the value of this Warrant calculated in accordance with the Black-Scholes formula.

-7-

(ii) Notwithstanding anything contained in this Warrant to the contrary and so long as the surviving entity pursuant to any Triggering Event is a company that has a class of equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock is listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, a Triggering Event shall not be deemed to have occurred if, prior to the consummation thereof, each Person (other than the Issuer) which may be required to deliver any Securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under this Warrant) and (B) the obligation to deliver to such Holder such Securities, cash or property as, in accordance with the foregoing provisions of this subsection (a), such Holder shall be entitled to receive, and such Person shall have similarly delivered to such Holder an opinion of counsel for such Person, which counsel shall be reasonably satisfactory to such Holder, or in the alternative, a written acknowledgement executed by the President or Chief Financial Officer of the Issuer, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this subsection (a)) shall be applicable to the Securities, cash or property which such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto.

(b)Stock Dividends, Subdivisions and Combinations. If at any time the Issuer shall:

(i)make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock (other than in connection with the dividend payable in shares of Common Stock to be issued by the Issuer to the Issuer’s stockholders in connection with the spin-off of the Issuer’s wholly-owned subsidiary, Pegasus Tel, Inc.),

(ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or

(iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock (other than pursuant to the Reverse Split),

then (1) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.

-8-

(c)Certain Other Distributions. If at any time the Issuer shall make or issue or set a record date for the determination of the holders of the Common Stock for the purpose of entitling them to receive any divi-dend or other distribution of:

(i)cash (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer),

(ii)any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), or

(iii)any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock),

then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B) the denominator of which shall be such Per Share Market Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board of Directors of the Issuer and supported by an opinion from an investment banking firm of recognized national standing acceptable to (but not affiliated with) the Holder) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4(c) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b).

(d)Issuance of Additional Shares of Common Stock. In the event the Issuer shall at any time within the two (2) year period following the Original Issuance Date issue any Additional Shares of Common Stock (otherwise than as provided in the foregoing subsections (b) through (c) of this Section 4), at a price per share less than $2.74 or without consideration, then the Warrant Price upon each such issuance shall be adjusted to the price equal to the consideration per share paid for such Additional Shares of Common Stock.

-9-

(e) Issuance of Common Stock Equivalents. In the event the Issuer shall at any time within the two (2) year period following the Original Issuance Date take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Issuer is the surviving corporation) issue or sell, any Common Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than $2.74 immediately prior to the time of such issue or sale, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than $2.74 at the time of such amendment or adjustment, then the Warrant Price then in effect shall be adjusted as provided in Section 4(d). No further adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Common Stock Equivalents.

(f)Other Provisions Applicable to Adjustments under this Section. The following provisions shall be ap-plicable to the making of adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect provided for in this Section 4:

(i)Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor) shall be issued for cash consideration, the consideration received by the Issuer therefor shall be the amount of the cash received by the Issuer therefor, or, if such Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for subscription, the subscription price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and without taking into account any compensation, discounts or expenses paid or incurred by the Issuer for and in the underwriting of, or otherwise in connection with, the issuance thereof). In connection with any merger or consolidation in which the Issuer is the surviving corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the Issuer shall be changed to or exchanged for the stock or other securities of another corporation), the amount of consideration therefore shall be, deemed to be the fair value, as determined reasonably and in good faith by the Board and acceptable to the Holder, of such portion of the assets and business of the nonsurviving corporation as the Board may determine to be attributable to such shares of Common Stock or Common Stock Equivalents, as the case may be. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Issuer for issuing such warrants or other rights plus the additional con-sideration payable to the Issuer upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Common Stock Equivalents shall be the consideration received by the Issuer for issuing war-rants or other rights to subscribe for or purchase such Common Stock Equivalents, plus the consideration paid or payable to the Issuer in respect of the subscription for or purchase of such Common Stock Equivalents, plus the additional consideration, if any, payable to the Issuer upon the exercise of the right of conversion or exchange in such Common Stock Equivalents. In the event of any consolidation or merger of the Issuer in which the Issuer is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Issuer shall be changed into or exchanged for the stock or other securities of another corporation, or in the event of any sale of all or substantially all of the assets of the Issuer for stock or other securities of any corporation, the Issuer shall be deemed to have issued a number of shares of its Common Stock for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on the date of such transaction of all such stock or securities or other property of the other corporation. In the event any consideration received by the Issuer for any securities consists of property other than cash, the fair market value thereof at the time of issuance or as otherwise applicable shall be as determined in good faith by the Board. In the event Common Stock is issued with other shares or securities or other assets of the Issuer for consideration which covers both, the consideration computed as provided in this Section 4(f)(i) shall be allocated among such securities and assets as determined in good faith by the Board.

-10-

(ii)When Adjustments to Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which this Warrant is exercisable that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 4(b)) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than one percent (1%) of the shares of Common Stock for which this Warrant is exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

(iii)Fractional Interests. In computing ad-justments under this Section 4, fractional interests in Common Stock shall be taken into account to the near-est one one-hundredth (1/100^th) of a share.

(iv)When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

(g)Form of Warrant after Adjustments. The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number and kind of Securities purchasable upon the exercise of this Warrant.

-11-

(h)Escrow of Warrant Stock. If after any property becomes distributable pursuant to this Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, and the Holder exer-cises this Warrant, any shares of Common Stock issuable upon exercise by reason of such adjustment shall be deemed the last shares of Common Stock for which this Warrant is exercised (notwithstanding any other provision to the contrary herein) and such shares or other property shall be held in escrow for the Holder by the Issuer to be issued to the Holder upon and to the extent that the event actually takes place, upon payment of the current Warrant Price. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be cancelled by the Issuer and escrowed property returned.

5.Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant Share Number after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder of this Warrant promptly after each adjustment. Any dispute between the Issuer and the Holder of this Warrant with respect to the matters set forth in such certificate may at the option of the Holder of this Warrant be submitted to an Independent Appraiser reasonably acceptable to the Issuer and the Holder. The Issuer shall use its best efforts to cause the Independent Appraiser to perform the calculations and notify the Issuer and the Holder of the results no later than five (5) business days from the time it receives the disputed calculation. Such Independent Appraiser’s calculation shall be binding upon all parties absent manifest error. The reasonable expenses of the Independent Appraiser in making such determination shall be paid by the Issuer, in the event the Holder's calculation was correct, or by the Holder, in the event the Issuer’s calculation was correct, or equally by the Issuer and the Holder in the event that neither the Issuer's or the Holder's calculation was correct.

6.Fractional Shares. No fractional shares of Warrant Stock will be issued in connection with any exercise hereof, but in lieu of such fractional shares, the Issuer shall round the number of shares to be issued upon exercise up to the nearest whole number of shares.

7.Ownership Cap and Exercise Restriction. Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of shares of Common Stock to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.9% of the then issued and outstanding shares of Common Stock; provided, however, that upon a holder of this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to Section 12 hereof) (the "Waiver Notice") that such Holder would like to waive this Section 7 with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7 will be of no force or effect with regard to all or a portion of the Warrant referenced in the Waiver Notice; provided, further, that this provision shall be of no further force or effect during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant.

-12-

8.Definitions. For the purposes of this Warrant, the following terms have the following meanings:

"Additional Shares of Common Stock" means all shares of Common Stock issued by the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by the Issuer after the Original Issue Date, except: (i) securities issued pursuant to a bona fide firm underwritten public offering of the Issuer’s securities, (ii) securities issued pursuant to the conversion or exercise of convertible or exercisable securities issued or outstanding on or prior to the Original Issue Date or issued pursuant to the Purchase Agreement, the Exercise Agreement or the Engagement Agreements (so long as the conversion or exercise price in such securities are not amended to lower such price and/or adversely affect the Holders), (iii) the Warrant Stock, (iv) securities issued (other than for cash) in connection with an acquisition of the Issuer, (v) any warrants issued to the placement agent for the transactions contemplated by the Purchase Agreement, the Exercise Agreement or the Engagement Agreements, (vi) securities issued in connection with strategic license agreements and other partnering arrangements so long as such issuances are not for the purpose of raising capital and the Issuer has received the prior written consent of the Holder, and (vii) the issuance of Common Stock or the issuance or grants of options to purchase Common Stock pursuant to the Issuer's stock option plans and employee stock purchase plans and which have been approved by the Issuer’s Board of Directors so long as such issuances in the aggregate do not exceed ten percent (10%) of the Issuer’s issued and outstanding Common Stock as of the Original Issue Date.

"Articles of Incorporation" means the Articles of Incorporation of the Issuer as in effect on the Original Issue Date, and as hereafter from time to time amended, modified, supplemented or restated in accordance with the terms hereof and thereof and pursuant to applicable law.

"Board" shall mean the Board of Directors of the Issuer.

"Capital Stock" means and includes (i) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type.

"Common Stock" means the Common Stock, par value $.001 per share, of the Issuer and any other Capital Stock into which such stock may hereafter be changed.

"Common Stock Equivalent" means any Convertible Security or warrant, option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security.

-13-

"Convertible Securities" means evidences of Indebtedness, shares of Capital Stock or other Securities which are or may be at any time convertible into or exchangeable for Additional Shares of Common Stock. The term "Convertible Security" means one of the Convertible Securities.

“Engagement Agreements” means the agreements between the Issuer and Kuhns Brothers, Inc. executed prior to the Original Issue Date that determine compensation to Kuhns Brothers, Inc. for its role in financing transactions of the Issuer.

“Exercise Agreement” means the agreement relating to the exercise of a Series J Warrant of the Issuer and the issuance of this Warrant, dated as of the Original Issue Date, among the Issuer and the Holder.

"Governmental Authority" means any governmental, regulatory or self-regulatory entity, department, body, official, authority, commission, board, agency or instrumentality, whether federal, state or local, and whether domestic or foreign.

"Holders" mean the Persons who shall from time to time own any Warrant. The term "Holder" means one of the Holders.

"Independent Appraiser" means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Issuer or the Holder of any Warrant.

"Issuer" means Sino Gas International Holdings, Inc., a Utah corporation, and its successors.

"Majority Holders" means at any time the Holders of Warrants exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding.

"Original Issue Date" means May 15, 2007.

"OTC Bulletin Board" means the over-the-counter electronic bulletin board.

"Other Common" means any other Capital Stock of the Issuer of any class which shall be authorized at any time after the date of this Warrant (other than Common Stock) and which shall have the right to participate in the distribution of earnings and assets of the Issuer without limitation as to amount.

“Outstanding Common Stock” means, at any given time, the aggregate amount of outstanding shares of Common Stock, assuming full exercise, conversion or exchange (as applicable) of all options, warrants and other Securities which are convertible into or exercisable or exchangeable for, and any right to subscribe for, shares of Common Stock that are outstanding at such time.

-14-

"Person" means an individual, corporation, limited liability company, partnership, joint stock company, trust, unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature.

"Per Share Market Value" means on any particular date (a) the last closing price per share of the Common Stock on such date on the OTC Bulletin Board or another registered national stock exchange on which the Common Stock is then listed, or if there is no closing price on such date, then the closing bid price on such date, or if there is no closing bid price on such date, then the closing price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the OTC Bulletin Board or any registered national stock exchange, the last closing price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices, at the close of business on such date, or if there is no closing price on such date, then the closing bid price on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the five (5) Trading Days preceding such date of determination, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the Majority Holders; provided, however, that the Issuer, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties. In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.

"Purchase Agreement" means the Series B Convertible Preferred Stock Purchase Agreement dated as of September 7, 2006, among the Issuer and the Purchasers.

"Purchasers" means the purchasers of the Series B Convertible Preferred Stockand Warrants issued by the Issuer pursuant to the Purchase Agreement.

"Securities" means any debt or equity securities of the Issuer, whether now or hereafter authorized, any instrument convertible into or exchangeable for Securities or a Security, and any option, warrant or other right to purchase or acquire any Security. "Security" means one of the Securities.

-15-

"Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute then in effect.

"Subsidiary" means any corporation at least 50% of whose outstanding Voting Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of its Subsidiaries, or by the Issuer and one or more of its Subsidiaries.

"Term" has the meaning specified in Section 1 hereof.

"Trading Day" means (a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

"Voting Stock" means, as applied to the Capital Stock of any corporation, Capital Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the Board of Directors (or other governing body) of such corporation, other than Capital Stock having such power only by reason of the happening of a contingency.

"Warrants" means the Warrants issued and sold pursuant to the Purchase Agreement, the Exercise Agreement and the Engagement Agreements, including, without limitation, this Warrant, and any other warrants of like tenor issued in substitution or exchange for any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other Warrants.

"Warrant Price" initially means U.S. $2.74, as such price may be adjusted from time to time as shall result from the adjustments specified in this Warrant, including Section 4 hereto.

"Warrant Share Number" means at any time the aggregate number of shares of Warrant Stock which may at such time be purchased upon exercise of this Warrant, after giving effect to all prior adjustments and increases to such number made or required to be made under the terms hereof.

"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.

-16-

9.Other Notices. In case at any time:

(A) the Issuer shall make any distributions to the holders of Common Stock; or

(B) the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or other rights; or

(C) there shall be any reclassification of the Capital Stock of the Issuer; or

(D) there shall be any capital reorganization by the Issuer; or

(E) there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer's property, assets or business (except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or

(F) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder of the date on which (i) the books of the Issuer shall close or a record shall be taken for such dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place. Such notice also shall specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their certificates for Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be. Such notice shall be given at least twenty (20) days prior to the action in question and not less than ten (10) days prior to the record date or the date on which the Issuer's transfer books are closed in respect thereto. This Warrant entitles the Holder to receive copies of all financial and other information distributed or required to be distributed to the holders of the Common Stock.

10.Amendment and Waiver. Any term, covenant, agreement or condition in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Issuer and the Majority Holders; provided, however, that no such amendment or waiver shall reduce the Warrant Share Number, increase the Warrant Price, shorten the period during which this Warrant may be exercised or modify any provision of this Section 10 without the consent of the Holder of this Warrant. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Warrant unless the same consideration is also offered to all holders of the Warrants.

-17-

11.Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Warrant shall not be interpreted or construed with any presumption against the party causing this Warrant to be drafted. The Issuer and the Holder agree that venue for any dispute arising under this Warrant will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue. The Issuer and the Holder irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York. The Issuer and the Holder consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 11 shall affect or limit any right to serve process in any other manner permitted by law. The Issuer and the Holder hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to this Warrant or the Purchase Agreement, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party. The parties hereby waive all rights to a trial by jury.

12.Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii) the Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later than 5:00 p.m., eastern time, on any date and earlier than 11:59 p.m., eastern time, on such date, (iii) the Trading Day following the date of mailing, if sent by overnight delivery by a nationally recognized overnight courier service or (iv) actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be with respect to the Holder of this Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at its last known address or facsimile number appearing on the books of the Issuer maintained for such purposes, or with respect to the Issuer, addressed to:

Sino Gas International Holdings, Inc.

N0.18 Zhong Guan Cun Dong St.

Haidian District

Beijing, China

Attention: Chen Fang

Tel. No.: 011-86-10-82600527

Fax No.: 011-010-82600042

-18-

with copies (which copies

shall not constitute notice

to the Issuer) to:GUZOV OFSINK, LLC

600 Madison Avenue, 14th Floor

New York, New York 10022

Attention: Darren Ofsink

Tel. No.: (212) 371-8008, ext. 127

Fax No.: (212) 688-7273

Any party hereto may from time to time change its address for notices by giving at least ten (10) days written notice of such changed address to the other party hereto.

13.Warrant Agent. The Issuer may, by written notice to each Holder of this Warrant, appoint an agent having an office in New York, New York for the purpose of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

14.Remedies. The Issuer stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Issuer in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

15.Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Issuer, the Holder hereof and (to the extent provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock.

16.Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein.

17.Registration Rights. The Holder of this Warrant is entitled to the benefit of certain registration rights with respect to the shares of Warrant Stock issuable upon the exercise of this Warrant pursuant to that certain Registration Rights Agreement, of even date herewith, by and among the Company and Persons listed on Schedule I thereto (the “Registration Rights Agreement”) and the registration rights with respect to the shares of Warrant Stock issuable upon the exercise of this Warrant by any subsequent Holder may only be assigned in accordance with the terms and provisions of the Registrations Rights Agreement.

-19-

18.Headings. The headings of the Sections of this Warrant are for convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-20-

IN WITNESS WHEREOF, the Issuer has executed this Series G Warrant as of the day and year first above written.

SINO GAS INTERNATIONAL HOLDINGS, INC.
	/s/ Sino Gas International Holdings, Inc.

-21-

EXERCISE FORM

SERIES G WARRANT

SINO GAS INTERNATIONAL HOLDINGS, INC.

The undersigned _______________, pursuant to the provisions of the within Warrant, hereby elects to purchase _____ shares of Common Stock of Sino Gas International Holdings Inc. covered by the within Warrant.

Dated:	Signature
	Address

Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the date of Exercise: _________________________

ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint _____________, attorney, to transfer the said Warrant on the books of the within named corporation.

Dated:	Signature
	Address

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the right to purchase _________ shares of Warrant Stock evidenced by the within Warrant together with all rights therein, and does irrevocably constitute and appoint ___________________, attorney, to transfer that part of the said Warrant on the books of the within named corporation.

Dated:	Signature
	Address

FOR USE BY THE ISSUER ONLY:

-22-

This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of ___________, _____, shares of Common Stock issued therefor in the name of _______________, Warrant No. W-_____ issued for ____ shares of Common Stock in the name of _______________.

-23-

EX-10.1

AGREEMENT

This agreement (this "Agreement") is made and entered into as of May 15, 2007, by and among Sino Gas International Holdings, Inc., a Utah corporation (the "Company"), Vision Opportunity Master Fund, Ltd., a limited liability company formed under the laws of the Cayman Islands (“Vision” and, together with the Company, the “Parties”).

This Agreement is being entered into with reference to (a) the Series B Convertible Preferred Stock Purchase Agreement dated as of September 7, 2006 among the Parties and the other purchasers named therein (the "Purchase Agreement") and (b) the Series J Warrant to purchase 1,993,355 shares of common stock of the Company (the “Common Stock”), issued to Vision by the Company on September 7, 2006 under the number W-J-06-01 and expiring on September 7, 2007 (the “Series J Warrant”).

The Company and Vision hereby agree as follows:

1. Definitions.

Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement or the Series J Warrant.

“Exercise Date” shall mean May 15, 2007.

2. Early Exercise of Series J Warrant and Consideration Therefor.

On the Exercise Date, Vision shall exercise its right under the Series J Warrant (as such right has been amended by this Agreement) to purchase 1,094,891 shares of Common Stock at an exercise price of $2.74 per share in an amount corresponding to a total purchase price of $3,000,001.34 (the “Purchase Price”; such 1,094,891 shares, the “Exercise Shares”). In consideration of Vision’s early exercise of the Series J Warrant (as such right has been amended by this Agreement), the Company shall issue to Vision a new warrant to purchase 1,094,891 shares of Common Stock in a form and containing terms substantially identical to the form and terms of the warrant attached hereto as Exhibit 1 (the “Series E Warrant”). Vision shall retain its right under the Series J Warrant to purchase an additional 898,464 shares of Common Stock under the terms set forth therein (as such right has been amended by this Agreement), which right shall be evidenced by a new warrant certificate issued to it by the Company (the “New Series J Warrant” and together with the Series E Warrant, the “Warrants”). The Warrants and the shares of Common Stock issuable upon exercise of the Warrants are sometimes collectively referred to herein as the “Securities.”

3. Closing.

On the Exercise Date, Vision shall wire the Purchase Price according to the written instructions provided by the Company as set forth on Exhibit 2 attached hereto, and the Company shall deliver to Vision the Exercise Shares, the Series E Warrant and the New Series J Warrant.

-1-

4. Representations and Warranties of the Parties.

(a) The Company has the requisite power and authority to enter into and perform this Agreement and to issue and sell the Securities in accordance with the terms hereof. Vision has the requisite power and authority to enter into and perform this Agreement and to purchase the Securities being sold to it hereunder. The execution, delivery and performance of this Agreement by each Party and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of such Party or its Board of Directors, stockholders, members or partners, as the case may be, is required.

(b) The Securities to be issued at the closing hereunder have been duly authorized by all necessary corporate action on behalf of the Company. When the shares of Common Stock issuable upon exercise of the Warrants are issued in accordance with the terms of the Warrants, such shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, and the holders thereof shall be entitled to all rights accorded to a holder of Common Stock.

(c) This Agreement constitutes a valid and binding agreement and obligation of each Party enforceable against such Party in accordance with its terms, subject to limitations on enforcement by general principles of equity and bankruptcy or other laws affecting the enforcement of creditors' rights generally.

(d) The Parties are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”) or Section 4(2) of the Securities Act.

(e) The Company represents that the offer, issuance and sale of the Securities is exempt from registration under the Securities Act pursuant to an exemption thereunder.

(f) Based in material part upon the representations herein of Vision, the Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Securities hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has taken or will take any action so as to exclude the issuance and sale of any of the Securities from exemption from registration under the Securities Act and applicable state securities laws, including by selling, offering to sell or soliciting offers to buy any of the Securities or securities similar thereto, or soliciting offers with respect thereto from, or entering into any preliminary conversations or negotiations relating thereto with, any person and neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Securities.

-2-

(g) Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from selling the Securities pursuant to Rule 506 under the Securities Act or any applicable exchange-related stockholder approval provisions, nor will the Company or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings and the Company does not have any registration statement pending before the Commission or currently under the Commission’s review.

(h) The Company understands and acknowledges that it has an obligation to issue the shares of Common Stock issuable upon exercise of the Warrants in accordance with this Agreement and the Warrants and that such obligation is not affected, reduced or eliminated by any dilutive effect that such issuance may have on the ownership interest of other stockholders of the Company.

(i) Vision is acquiring the Warrants solely for its own account for the purpose of investment and not with a view to or for sale in connection with distribution. Vision does not have a present intention to sell the Warrants, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Warrants to or through any person or entity; provided, however, that by making the representations herein and subject to Section 4(l) below, Vision does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition. Vision acknowledges that it is able to bear the financial risks associated with an investment in the Warrants and has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of an investment in the Company.

(j) Vision is an “accredited investor” as defined in Regulation D, is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, and is not a broker-dealer.

(k) Vision acknowledges that it has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Exercise Shares and the Warrants (and Common Stock issuable upon exercise thereof) to be issued under this Agreement.

(l) Vision understands that the Securities must be held indefinitely unless they are registered under the Securities Act or an exemption from registration is available, acknowledges that Vision is familiar with Rule 144 of the rules and regulations of the Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”), and understands that Rule 144 permits resales only under certain circumstances. Vision understands that to the extent that Rule 144 is not available, it will be unable to sell any Exercise Shares, Warrants or shares issuable upon exercise thereof without either registration under the Securities Act or the existence of another exemption from such registration requirement.

-3-

5.Registration Rights. The parties agree that the shares of Common Stock issuable upon exercise of the Warrants are entitled to all of the benefits of the registration rights granted by the Company pursuant to that certain Registration Rights Agreement dated as of September 7, 2006 by and among the Parties and the other purchasers listed on Schedule I thereto (the “Registration Rights Agreement”) and the shares of Common Stock issuable upon exercise of the Warrants shall constitute “Registrable Securities” pursuant to the Registration Rights Agreement. The foregoing sentence notwithstanding, the Company is not obligated at any time to register any shares the registration of which, at such time, would entail a violation of Rule 415 under the Securities Act (“Rule 415”) or the guidance of the Commission in connection therewith.

6. Governing Law; Jurisdiction. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. Each Party (i) hereby irrevocably submits to the jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York County for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.

7.Counterparts. This Agreement may be executed by facsimile signature or electronic transmission in “pdf” format and in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

8.Survival. The representations and warranties of the Parties shall survive the closing hereunder.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-4-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized persons as of the date first indicated above.

SINO GAS INTERNATIONAL HOLDINGS, INC.
By:	/s/ Sino Gas International Holdings, Inc.

VISION OPPORTUNITY MASTER FUND, LTD.
By:	/s/ Vision Opportunity Master Fund, Ltd.

-5-

Exhibit 1

Form of Series E Warrant

-6-

Exhibit 2

Wiring Instructions for Purchase Price

-7-

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Yuchuan Liu, certify that:

1. I have reviewed this report on Form 10-QSB of Sino Gas International Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 17, 2007

/s/ Yuchuan Liu

Yuchuan Liu

Chairman, Director, and

Chief Executive Officer (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Fang Chen, certify that:

1. I have reviewed this report on Form 10-QSB of Sino Gas International Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 17, 2007

/s/ Fang Chen

Fang Chen

Chief Financial Officer

 (principal financial officer and principal accounting officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his or her capacity as an officer of Sino Gas International Holdings, Inc. (the “Company”), for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The quarterly report of the Company on Form 10-QSB for the quarter ended June 30, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 17, 2007

/s/ Yuchuan Liu

Yuchuan Liu

Chairman, Director, and

Chief Executive Officer (principal executive officer)

/s/ Fang Chen

Fang Chen

Chief Financial Officer

 (principal financial officer and principal accounting officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.