**UNITED      STATES **

**SECURITIES      AND EXCHANGE COMMISSION**

**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: March                31, 2007 |
|--------|------------------------------------------------------------------------------|

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

|   | For                  the transition period from                           to                           |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**SINO      GAS INTERNATIONAL HOLDINGS, INC.**

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

| The                Farmhouse558                Lime Rock RoadLime                Rock, Connecticut 06039 |
|----------------------------------------------------------------------------------------------------------|
| (Address                of principal executive offices)                                                  |

----

**Table      of Contents**

|                                                                                                                      |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|
| PART                I. - FINANCIAL INFORMATION                                                                            |   |
|                                                                                                                      |   |
| Item                1.                                                                                                    |   |
| Financial                Statements                                                                                       | 1      |
| Notes                to Condensed Consolidated Financial Statements (Unaudited)                                           | 7      |
|                                                                                                                      |   |
| Item                2.                                                                                                    |   |
| Management’s                Discussion and Analysis of Financial Condition and Results of                Operations | 22     |
|                                                                                                                      |   |
| Item                3.                                                                                                    |   |
| Controls                and Procedures                                                                                    | 28     |
|                                                                                                                      |   |
| PART                II. - OTHER INFORMATION                                                                               |   |
|                                                                                                                      |   |
| Item                6.                                                                                                    |   |
| Exhibits                                                                                                                  | 28     |
|                                                                                                                      |   |
| Signatures                                                                                                                | 29     |

----

**PART      I**

**Item      1.**
**Financial      Statements**

**SINO      GAS INTERNATIONAL HOLDINGS, INC.**

**REVIEWED      FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006**

**(Stated      in US dollars)**

| CONTENTS                                                          | PAGES                                    |
|------------------------------------------------------------------------|------------------------------------------|
|                                                                   |                                     |
|                                                                   |                                     |
| INDEPENDENT                  AUDITOR’S REPORT                    | 1                                        |
|                                                                   |                                     |
| CONSOLIDATED                  BALANCE SHEETS                           | 2                  -                  3  |
|                                                                   |                                     |
| CONSOLIDATED                  STATEMENTS OF INCOME                     | 4                                        |
|                                                                   |                                     |
| CONSOLIDATED                  STATEMENTS OF STOCKHOLDERS’ EQUITY | 5                                        |
|                                                                   |                                     |
| CONSOLIDATED                  STATEMENTS OF CASH FLOWS                 | 6                                        |
|                                                                   |                                     |
| NOTES                  TO FINANCIAL STATEMENTS                         | 7                  -                  21 |

----

**Report        of Independent Registered Public Accounting Firm**

| South                  San Francisco, California | Samuel                  H. Wong & Co., LLP |
|--------------------------------------------------|------------------------------------------------|
| May                  7, 2007                     | Certified                  Public Accountants  |

----

**SINO          GAS INTERNATIONAL HOLDINGS, INC.**

**CONSOLIDATED          BALANCE SHEETS**

**AS          OF MARCH 31, 2007 AND 2006**

**(Stated          in US Dollars)**

|                                                        |   | Notes  |   | **2007** |   | **2006**   |   |
|-------------------------------------------------------------|--------|--------|--------|----------|--------|------------|--------|
| ASSETS                                                      |   |   |   |     |   |       |   |   |   |   |
| Current                  assets                             |   |   |   |     |   |       |   |   |   |   |
| Cash                  and cash equivalents                  |   |   |   |     | $      | 2,345,164  |   | $ | 937,436 |   |
| Notes                  receivable                           |   |   |   |     |   | 64,592     |   |   | - |   |
| Accounts                  receivable                        |   |   |   |     |   | 5,529,115  |   |   | 5,898,898 |   |
| Advances                  to suppliers                      |   |   |   |     |   | 572,455    |   |   | 364,131 |   |
| Prepaid                  expenses                           |   |   |   |     |   | 99,378     |   |   | 24,790 |   |
| Other                  receivables                          |   |   | 4      |     |   | 1,910,158  |   |   | 704,623 |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
| Total                  current assets                       |   |   |   |     | $      | 10,520,862 |   | $ | 7,929,878 |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
| *Long                  term assets*                         |   |   |   |     |   |       |   |   |   |   |
| Investments                  in equity securities           |   |   | 5      |     |   | 3,310,647  |   |   | 2,454,994 |   |
| Plant                  and equipment, net                   |   |   | 7      |     |   | 13,890,374 |   |   | 3,219,033 |   |
| Construction                  in progress                   |   |   |   |     |   | 5,973,513  |   |   | 3,206,343 |   |
| Intangible                  assets                          |   |   | 6      |     |   | 630,040    |   |   | 432,072 |   |
| Goodwill                                                    |   |   | 3      |     |   | 875,754    |   |   | - |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
| TOTAL                  ASSETS                               |   |   |   |     | $      | 35,201,190 |   | $ | 17,242,320 |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS’ EQUITY |   |   |   |     |   |       |   |   |   |   |
| Current                  liabilities                        |   |   |   |     |   |       |   |   |   |   |
| Accounts                  payable                           |   |   |   |     | $      | 3,744,612  |   | $ | 2,979,506 |   |
| Other                  payables                             |   |   | 8      |     |   | 657,999    |   |   | 1,392,388 |   |
| Unearned                  revenue                           |   |   |   |     |   | 16,879     |   |   | 175,093 |   |
| Accrued                  liabilities                        |   |   |   |     |   | 3,083,235  |   |   | 87,423 |   |
| Acquisition                  payable                        |   |   | 3      |     |   | 1,937,759  |   |   | - |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
| Total                  current liabilities                  |   |   |   |     | $      | 9,440,484  |   | $ | 4,634,410 |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
|                                                        |   |   |   |     |   |       |   |   |   |   |
| TOTAL                  LIABILITIES                          |   |   |   |     | $      | 9,440,484  |   | $ | 4,634,410 |   |

----

**SINO          GAS INTERNATIONAL HOLDINGS, INC.**

**CONSOLIDATED          BALANCE SHEETS (Continued)**

**AS          OF MARCH 31, 2007 AND 2006**

**(Stated          in US Dollars)**

|                                                                                                                                                                                                    |   | Notes  |   | 2007   |   | 2006       |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|------------|--------|
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |
| Minority                  interest                                                                                                                                                                      |   |   |   |   |   | 64,592     |   |   | - |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |
| STOCKHOLDERS’                  EQUITY                                                                                                                                                             |   |   |   |   |   |       |   |   |   |   |
| Preferred                  stock A US$0.001 par value; 20,000,000 authorized; nil and nil                  issued and                  outstanding as of March 31, 2007 and 2006 respectively           |   |   |   |   |   | -          |   |   | - |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |
| Preferred                  stock B US$0.001 par value; 5,000,000 authorized; 3,795,571 and                  nil issued                  and outstanding as of March 31, 2007 and 2006 respectively      |   |   |   |   | $      | 3,796      |   | $ | - |   |
| Common                  stock US$0.001 par value; 250,000,000 authorized; 14,920,344 and                  14,361,646 issued and outstanding as of March 31, 2007 and 2006                  respectively |   |   |   |   |   | 14,920     |   |   | 14,362 |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |
| Additional                  paid-in-capital                                                                                                                                                             |   |   |   |   |   | 12,069,176 |   |   | 4,812,650 |   |
| Statutory                  reserves                                                                                                                                                                     |   |   |   |   |   | 2,025,022  |   |   | 1,219,720 |   |
| Retained                  earnings                                                                                                                                                                      |   |   |   |   |   | 10,584,954 |   |   | 6,321,886 |   |
| Accumulated                  other comprehensive                                                                                                                                                        |   |   |   |   |   |       |   |   |   |   |
| income                                                                                                                                                                                                  |   |   |   |   |   | 998,246    |   |   | 239,292 |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |
|                                                                                                                                                                                                    |   |   |   |   | $      | 25,696,114 |   | $ | 12,607,910 |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS’                                                                                                                                              |   |   |   |   |   |       |   |   |   |   |
| EQUITY                                                                                                                                                                                                  |   |   |   |   | $      | 35,201,190 |   | $ | 17,242,320 |   |
|                                                                                                                                                                                                    |   |   |   |   |   |       |   |   |   |   |

----

**SINO          GAS INTERNATIONAL HOLDINGS, INC.**

**CONSOLIDATED          STATEMENTS OF INCOME**

**FOR          THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated          in US Dollars)**

|                                                 |   |   |   | 2007   |   | 2006       |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|------------|--------|
|                                                 |   | Notes  |   |   |   |       |   |
|                                                 |   |   |   |   |   |       |   |
| Net                  revenues                        |   |   | 11     |   | $      | 2,438,227  |   | $ | 655,092 |   |
| Cost                  of revenues                    |   |   |   |   |   | (1,837,630 | )      |   | (517,183 | ) |
|                                                 |   |   |   |   |   |       |   |   |   |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
| Gross                  profit                        |   |   |   |   |   | 600,597    |   |   | 137,909 |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
| Operating                  expenses                  |   |   |   |   |   |       |   |   |   |   |
| Selling                  and marketing expenses      |   |   |   |   |   | (56,198    | )      |   | (10,154 | ) |
| General                  and administrative expenses |   |   |   |   |   | (441,374   | )      |   | (116,579 | ) |
|                                                 |   |   |   |   |   |       |   |   |   |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
| Income                  from continuing operations   |   |   |   |   | $      | 103,025    |   |   | 11,176 |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
| Finance                  costs, net                  |   |   | 9      |   |   | (5,370     | )      |   | (86 | ) |
| Other                  income                        |   |   |   |   |   | 36,088     |   |   | - |   |
| Other                  expenses                      |   |   |   |   |   | (1,495     | )      |   | - |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
| Income                  before taxation              |   |   |   |   | $      | 132,248    |   | $ | 11,090 |   |
| Income                  tax                          |   |   | 10     |   |   | (16,865    | )      |   | (998 | ) |
|                                                 |   |   |   |   |   |       |   |   |   |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
| Net                  income                          |   |   |   |   | $      | 115,383    |   | $ | 10,092 |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |
|                                                 |   |   |   |   |   |       |   |   |   |   |

| Net                  income per share,                         |   |   |       |   |   |       |   |
|----------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
| Basic                                                          |   | $      | 0.008      |   | $      | 0.001      |   |
| Diluted                                                        |   |   | 0.004      |   |   | 0.001      |   |
|                                                           |   |   |       |   |   |       |   |
|                                                           |   |   |       |   |   |       |   |
| Weighted                  average shares outstanding of common |   |   |       |   |   |       |   |
| stock,                                                         |   |   |       |   |   |       |   |
| Basic                                                          |   |   | 14,730,597 |   |   | 14,361,646 |   |
| Diluted                                                        |   |   | 28,724,652 |   |   | 14,361,646 |   |

----

**SINO          GAS INTERNATIONAL HOLDINGS, INC.**

**CONSOLIDATED**
**          STATEMENTS OF STOCKHOLDERS’ EQUITY**

**FOR          THE **
**THREE          MONTHS**
**          ENDED MARCH 31, 2007 AND 2006**

**(Stated          in US Dollars)**

|                                          |   | PreferredShares |      | Stock                  BAmount |   | Common                  Shares |   | Stock                  Amount |       | Additional                  Paid-inCapital |   | Statutory                  Reserves |   | Retained                  Earnings |       | Accumulated                  Other comprehensive Income |   | Total     |   |
|-----------------------------------------------|--------|-----------------|-----------|--------------------------------|--------|--------------------------------|--------|-------------------------------|------------|--------------------------------------------|--------|-------------------------------------|--------|------------------------------------|------------|---------------------------------------------------------|--------|-----------|--------|
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |
| Balance,                  January 1, 2006     |   |            | -         |                           | $      | -                              |   |                          | 14,361,646 |                                       | $      | 14,362                              |   |                               | 4,812,650  |                                                    |   | 1,219,720 |   |   | 6,311,794 |   |   | 267,865 |   |   | 12,626,391 |   |
| Net                  income                   |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   | 10,092 |   |   |   |   |   | 10,092 |   |
| Foreign                  currency translation |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
| adjustment                                    |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   | (28,573 | ) |   | (28,573 | ) |
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
| Balance,                  March 31, 2006      |   |            | -         |                           | $      | -                              |   |                          | 14,361,646 |                                       | $      | 14,362                              |   |                               | 4,812,650  |                                                    |   | 1,219,720 |   |   | 6,321,886 |   |   | 239,292 |   |   | 12,607,910 |   |
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
| Balance,                  January 1, 2007     |   |            | 4,023,268 |                           | $      | 4,023                          |   |                          | 14,692,647 |                                       | $      | 14,693                              |   |                               | 12,069,176 |                                                    |   | 2,025,022 |   |   | 10,469,571 |   |   | 824,296 |   |   | 25,406,780 |   |
| Net                  income                   |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   | 115,383 |   |   |   |   |   | 115,383 |   |
| Stock                  conversion             |   |            | (227,697  | )                              |   | (227                           | )      |                          | 227,697    |                                       |   | 227                                 |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
| adjustment                                    |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   | 173,950 |   |   | 173,950 |   |
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |
| Balance,                  March 31, 2007      |   |            | 3,795,571 |                           | $      | 3,796                          |   |                          | 14,920,344 |                                       | $      | 14,920                              |   |                               | 12,069,176 |                                                    |   | 2,025,022 |   |   | 10,584,954 |   |   | 998,246 |   |   | 25,696,114 |   |
|                                          |   |            |      |                           |   |                           |   |                          |       |                                       |   |                                |   |                               |       |                                                    |   |      |   |   |   |   |   |   |   |   |   |   |

----

**SINO          GAS INTERNATIONAL HOLDINGS, INC.**

**CONSOLIDATED**
**          STATEMENTS OF CASH FLOWS**

**FOR        THE **
**THREE        MONTHS**
**        ENDED MARCH 31, 2007 AND 2006**

**(Stated          in US Dollars)**

|                                                                |   | **2007** |       | **2006** |   |
|---------------------------------------------------------------------|--------|----------|------------|----------|--------|
| Cash                  flows from operating activities               |   |     |       |     |   |   |   |
| Net                  income                                         |   | $        | 115,383    |     | $      | 10,092 |   |
|                                                                |   |     |       |     |   |   |   |
| Depreciation                  and amortization                      |   |     | 38,844     |     |   | 32,966 |   |
| Equity                  in investments                              |   |     | (371,618   | )        |   | 5,534 |   |
| Decrease                  in accounts and other receivables         |   |     | 310,419    |     |   | 1,600,187 |   |
| Increase/(decrease)                  in accounts and other payables |   |     | 3,023,295  |     |   | (1,055,844 | ) |
| Net                  cash provided by operating activities          |   | $        | 3,487,941  |     | $      | 592,935 |   |
|                                                                |   |     |       |     |   |   |   |
| Cash                  flows from investing activities               |   |     |       |     |   |   |   |
| Purchase                  of plant and equipment                    |   |     | (3,320,688 | )        |   | (51,317 | ) |
| Pledge                  deposits                                    |   |     | 3,124,541  |     |   | - |   |
| Payment                  for the construction in progress           |   |     | (1,345,436 | )        |   | (151,996 | ) |
| Purchase                  of intangible assets                      |   |     | (172,210   | )        |   | 5,193 |   |
| Acquisition                  of subsidiaries                        |   |     | (930,801   | )        |   | - |   |
| Net                  cash used in investing activities              |   | $        | (2,644,594 | )        | $      | (198,120 | ) |
|                                                                |   |     |       |     |   |   |   |
| Cash                  flows from financing activities               |   |     |       |     |   |   |   |
| Repayment                  of bank borrowings                       |   |     | (2,430,445 | )        |   | - |   |
| Net                  cash used in financing activities              |   | $        | (2,430,445 | )        | $      | - |   |
|                                                                |   |     |       |     |   |   |   |
| Net                  in cash and cash equivalents sourced/(used)    |   |     | (1,587,098 | )        |   | 394,815 |   |
| Effect                  of foreign currency translation on cash and |   |     |       |     |   |   |   |
| cash                  equivalents                                   |   |     | 293,589    |     |   | (28,573 | ) |
| Cash                  and cash equivalents - beginning of year      |   |     | 3,638,673  |     |   | 571,194 |   |
| Cash                  and cash equivalents - end of year            |   | $        | 2,345,164  |     | $      | 937,436 |   |

|                                                  |   |   |   |   |   |   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Supplementary                  cash flow information: |   |   |   |   |   |   |   |
| Interest                  received                    |   | $      | 94,653 |   | $      | 240    |   |
| Interest                  paid                        |   |   | 43,617 |   |   | 326    |   |
| Income                  tax paid                      |   |   | 16,865 |   |   | 998    |   |

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**1.**
**ORGANIZATION        AND **
**PRINCIPAL        ACTIVITIES**

*Basis        of Presentation and Organization*

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES**

*(a)*
*Method        of Accounting*

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

*(b)*
*Use        of estimates*

*(c)*
*Economic        and political risks*

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

*(d)*
*Principles        of Consolidation*

| Name                  of Company                                 |   | Place                  of Incorporation |   | Date                  of Incorporation |   | Beneficiary                  interest % |   | EquityInterest                  % |   | RegisteredCapital               |
|------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|--------|-----------------------------------------|--------|-----------------------------------|--------|---------------------------------|
|                                                             |   |                                    |   |                                   |   |                                    |   |                              |   |                            |
|                                                             |   | The                  British            |   |                                   |   |                                    |   |                              |   |                            |
| GAS                  Investment China Co., Ltd.                  |   | Virgin                  Islands         |   | 6/19/2003                              |   | 100                                     |   | 100                               |   | USD                  10,000,000 |
|                                                             |   |                                    |   |                                   |   |                                    |   |                              |   |                            |
|                                                             |   | The                  British            |   |                                   |   |                                    |   |                              |   |                            |
| Sino                  Gas Construction Limited                   |   | 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                                |   | RMB 10,000,000             |
|                                                             |   |                                    |   |                                   |   |                                    |   |                              |   |                            |
| 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  |
|                                                             |   |                                    |   |                                   |   |                                    |   |                              |   |                            |
| Longyao Zhongran Weiye Gas Co., 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  |

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

|   | *(d)* | *Principles                  of Consolidation (Cont’d)* |
|--------|-------|---------------------------------------------------------------|

| Name                  of Company                        |   | Place                  of Incorporation |   | Date                  of Incorporation |   |   Beneficiary                  interest % |   | EquityInterest                  % |   | RegisteredCapital               |
|---------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------|--------|---------------------------------|
|                                                    |   |                                    |   |                                   |   |                                                |   |                              |   |                            |
| 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* |
|--------|-------|----------------------------------------------|

|   | *(f)* | *Accounts                  and Other Receivable* |
|--------|-------|--------------------------------------------------|

|  | *(g)* | *Advances                  to Suppliers* |
|--|-------|------------------------------------------|

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

*(h)*
*Investments        in Equity Securities*

|                                                                                                 |           |   |                                               |   |          |   | *Portion                  of* |   |                                                                                   |
|------------------------------------------------------------------------------------------------------|----------------|--------|----------------------------------------------------|--------|---------------|--------|-------------------------------|--------|----------------------------------------------------------------------------------------|
|                                                                                                 |           |   |                                               |   |          |   | *Nominal*                     |   |                                                                                   |
| *Name                  of*                                                                           | *Place*        |   | *Form                  of*                         |   |          |   | *Value                  of*   |   |                                                                                   |
| *Associate*                                                                                          | *of*           |   | *Business*                                         |   | *Registered*  |   | *Registered*                  |   | *Principal*                                                                            |
| *Company*                                                                                            | *Registration* |   | *Structure*                                        |   | *Capital*     |   | *Capital*                     |   | *Activities*                                                                           |
|                                                                                                 |           |   |                                               |   |          |   |                          |   |                                                                                   |
| Beijing                  ZhongranXiangke                  Oil GasTechnology                  Co. Ltd | PRC            |   | Sino-foreign                  equity joint venture |   | RMB20,000,000 |   | 40                            |   | Trading                  of natural gas and gas pipeline                  construction |

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

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

*(j)*
*Plant        and Equipment*

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

*(k)*
*Intangible        Assets*

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

*(l)*
*Construction        in progress*

*.*

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.        **
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

|   | *(m)* | *Unearned                  Revenue* |
|--------|-------|-------------------------------------|

|   | *(n)* | *Financial                  Instruments* |
|--------|-------|------------------------------------------|

|   | *(o)* | *Foreign                  Currency Translation* |
|--------|-------|-------------------------------------------------|

|                                                     |   | **2007** |   | **2006** |   |
|----------------------------------------------------------|--------|----------|--------|----------|--------|
| Months                  end RMB : US$ exchange rate      |   |     | 7.7409 |     |   | 8.0352 |   |
| Average                  monthly RMB : US$ exchange rate |   |     | 7.7714 |     |   | 8.0558 |   |

*(p)*
*Revenue        Recognition*

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.        **
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

*(q)*
*Other        Income*

*(r)*
*Income        Taxes*

*(s)*
*Advertising*

*(t)*
*Concentration        of Credit Risk*

*(u)*
*Retirement        Benefits*

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.        **
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

*(v)*
*Statutory        Surplus Reserves*

|   | 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* |
|--------|-------|--------------------------------------------|

|   | *(x)* | *Comprehensive                  Income* |
|--------|-------|-----------------------------------------|

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**

|   | *(y)* | *Recent                  Accounting Pronouncements* |
|--------|-------|-----------------------------------------------------|

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**3.**
**ACQUISITION**

| Cash                                    |   | $      | 489,448    |   |
|-----------------------------------------|--------|--------|------------|--------|
| Other                  current assets   |   |   | 929,104    |   |
| Property                  and equipment |   |   | 2,592,788  |   |
| Other                  assets           |   |   | 734,902    |   |
|                                    |   |   |       |   |
| Total                  assets acquired  |   | $      | 4,746,242  |   |
| Current                  liabilities    |   |   | (2,263,214 | )      |
|                                    |   |   |       |   |
| Net                  assets acquired    |   | $      | 2,483,028  |   |
| Goodwill                                |   |   | 875,754    |   |
|                                    |   |   |       |   |
| Acquisition                  price      |   | $      | 3,358,782  |   |

**4.**
**OTHER        RECEIVABLES**

|                                        |   | **2007** |      | **2006** |   |
|---------------------------------------------|--------|----------|-----------|----------|--------|
| Deposit                  paid               |   | $        | 1,625,672 |     | $      | 10,043 |   |
| Amounts                  due from employees |   |     | 55,807    |     |   | 25,489 |   |
| Sundry                  receivables         |   |     | 228,679   |     |   | 669,091 |   |
|                                        |   | $        | 1,910,158 |     | $      | 704,623 |   |

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**5.**
**INVESTMENT        IN EQUITY SECURITIES**

|                                                         |   | **2007** |      | **2006** |   |
|--------------------------------------------------------------|--------|----------|-----------|----------|--------|
|                                                         |   |     |      |     |   |
| As                  at January 1, at Cost                    |   | $        | 2,939,029 |     | $      | 2,443,378 |   |
| Changes                  due to foreign currency translation |   |     | 371,618   |     |   | 11,616 |   |
|                                                         |   |     |      |     |   |   |   |
|                                                         |   |     |      |     |   |   |   |
| As                  at March 31, 2007                        |   | $        | 3,310,647 |     | $      | 2,454,994 |   |
|                                                         |   |     |      |     |   |   |   |

**6.**
**INTANGIBLE        ASSETS**

|                                                |   | **2007** |    | **2006** |   |
|-----------------------------------------------------|--------|----------|---------|----------|--------|
| *At                  Cost*                          |   |     |    |     |   |   |   |
| Land                  use rights                    |   | $        | 121,445 |     | $      | 110,110 |   |
| Franchises                                          |   |     | 355,256 |     |   | 325,685 |   |
| Other                  intangibles                  |   |     | 169,676 |     |   | 373 |   |
|                                                |   |     |    |     |   |   |   |
|                                                |   |     |    |     |   |   |   |
|                                                |   |     | 646,377 |     |   | 436,168 |   |
| *Less**:                  Accumulated amortization* |   |     | (16,337 | )        |   | (4,096 | ) |
|                                                |   |     |    |     |   |   |   |
|                                                |   |     |    |     |   |   |   |
|                                                |   | $        | 630,040 |     | $      | 432,072 |   |
|                                                |   |     |    |     |   |   |   |

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**7.**
**PLANT        AND EQUIPMENT, NET**

|                                                |   | **2007** |       | **2006** |   |
|-----------------------------------------------------|--------|----------|------------|----------|--------|
| *At                  Cost*                          |   |     |       |     |   |   |   |
| Gas                  Pipelines                      |   | $        | 8,524,074  |     | $      | 2,837,692 |   |
| Motor                  Vehicles                     |   |     | 3,337,767  |     |   | 99,376 |   |
| Machinery                  & Equipment          |   |     | 263,930    |     |   | 253,536 |   |
| Buildings                                           |   |     | 2,317,912  |     |   | 86,952 |   |
| Leasehold                  Improvements             |   |     | 48,014     |     |   | 46,036 |   |
| Office                  Equipment                   |   |     | 109,536    |     |   | 41,607 |   |
|                                                |   |     |       |     |   |   |   |
|                                                |   |     |       |     |   |   |   |
|                                                |   | $        | 14,601,233 |     | $      | 3,365,199 |   |
|                                                |   |     |       |     |   |   |   |
| *Less**:                  Accumulated depreciation* |   |     | 710,859    |     |   | 146,166 |   |
|                                                |   |     |       |     |   |   |   |
|                                                |   | $        | 13,890,374 |     | $      | 3,219,033 |   |
|                                                |   |     |       |     |   |   |   |

**8.**
**OTHER        PAYABLES**

|                                                               |   | **2007** |    | **2006** |   |
|--------------------------------------------------------------------|--------|----------|---------|----------|--------|
|                                                               |   |     |    |     |   |
| Employees’                  welfare payables                 |   | $        | 3,023   |     | $      | - |   |
| Loan                  from an unrelated company - Qian Shi Li      |   |     | -       |     |   | 681,250 |   |
| Loan                  from an unrelated company - Shi Yi Long Da   |   |     | -       |     |   | 500,409 |   |
| Loan                  from an unrelated company - Tianjin Changlin |   |     | 581,328 |     |   | - |   |
| Sundry                  payables                                   |   |     | 73,648  |     |   | 210,729 |   |
|                                                               |   |     |    |     |   |   |   |
|                                                               |   |     |    |     |   |   |   |
|                                                               |   | $        | 657,999 |     | $      | 1,392,388 |   |
|                                                               |   |     |    |     |   |   |   |

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**9.**
**FINANCE        COSTS, NET**

|                                          |   | **2007** |    | **2006** |   |
|-----------------------------------------------|--------|----------|---------|----------|--------|
|                                          |   |     |    |     |   |
| Total                  interest cost incurred |   | $        | 43,617  |     | $      | 326 |   |
| Interest                  income              |   |     | (94,653 | )        |   | (240 | ) |
| Other                                         |   |     | 56,406  |     |   | - |   |
|                                          |   |     |    |     |   |   |   |
|                                          |   |     |    |     |   |   |   |
|                                          |   | $        | 5,370   |     | $      | 86 |   |
|                                          |   |     |    |     |   |   |   |

**10.**
**INCOME        TAX**

|                                                               |   | **2007** |    | **2006** |   |
|--------------------------------------------------------------------|--------|----------|---------|----------|--------|
|                                                               |   |     |    |     |   |
| Income                  before taxation                            |   | $        | 132,248 |     | $      | 11,090 |   |
|                                                               |   |     |    |     |   |   |   |
|                                                               |   |     |    |     |   |   |   |
| Provision                  for income taxes at PRC income tax rate |   |     | 43,642  |     |   | 3,660 |   |
| Effect                  of tax exemption granted to the Group      |   |     | (26,777 | )        |   | (2,662 | ) |
|                                                               |   |     |    |     |   |   |   |
|                                                               |   |     |    |     |   |   |   |
| Income                  tax                                        |   | $        | 16,865  |     | $      | 998 |   |
|                                                               |   |     |    |     |   |   |   |

----

**SINO        GAS INTERNATIONAL HOLDINGS, INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**

**(Stated        in US Dollars)**

**11.**
**BUSINESS        SEGMENT**

|                            |   | *Gas                  pipeline* |     | *Sales                  of*  |   |           |   |
|---------------------------------|--------|---------------------------------|----------|------------------------------|--------|----------------|--------|
| *2007*                          |   | *construction*                  |     | *piped                  gas* |   | *Consolidated* |   |
|                            |   |                            |     |                         |   |           |   |
| Turnover                        |   | $                               | 615,336  |                         |   | 1,822,891      |   |   | 2,438,227 |   |
| Cost                  of sales  |   |                            | (124,218 | )                            |   | (1,713,412     | )      |   | (1,837,630 | ) |
|                            |   |                            |     |                         |   |           |   |   |   |   |
|                            |   |                            |     |                         |   |           |   |   |   |   |
| Segment                  result |   | $                               | 491,118  |                         |   | 109,479        |   |   | 600,597 |   |
|                            |   |                            |     |                         |   |           |   |   |   |   |

|                            |   | *Gas                  pipeline* |    | *Sales                  of*  |   |           |   |
|---------------------------------|--------|---------------------------------|---------|------------------------------|--------|----------------|--------|
| *2006*                          |   | *construction*                  |    | *piped                  gas* |   | *Consolidated* |   |
|                            |   |                            |    |                         |   |           |   |
| Turnover                        |   | $                               | 117,971 |                         |   | 537,121        |   |   | 655,092 |   |
| Cost                  of sales  |   |                            | (19,989 | )                            |   | (497,194       | )      |   | (517,183 | ) |
|                            |   |                            |    |                         |   |           |   |   |   |   |
|                            |   |                            |    |                         |   |           |   |   |   |   |
| Segment                  result |   | $                               | 97,982  |                         |   | 39,927         |   |   | 137,909 |   |
|                            |   |                            |    |                         |   |           |   |   |   |   |

----

**Item      2. **
**Management’s      Discussion and Analysis**

**RESULTS      OF OPERATIONS**

**Three      month periods ended March 31, 2007 and 2006 **

**Overview**

|                            | For                the 3 months ended March 31, |   |    |
|---------------------------------|-------------------------------------------------|--------|---------|
|                            | 2007                                            |   | 2006    |   | Change |
|                            | US$                                             |   | US$     |   | % |
| Net                Sales        | 2,438,227                                       |   | 655,092 |   | 272.20% |
| Gross                Profit     | 600,597                                         |   | 137,909 |   | 335.5% |
| Operating                Income | 103,025                                         |   | 11,176  |   | 821.84% |
| Net                Income       | 115,383                                         |   | 10,092  |   | 1043% |
| Gross                Margin     | 21.72%                                          |   | 21.05%  |   | 0.67% |
| Net                Margin       | 4.73%                                           |   | 1.54%   |   | 3.19% |

----

**Net      Sales**

| (                $                thousand) |   | For                the 3 months ended March 31 |   |   |
|---------------------------------------------|--------|------------------------------------------------|--------|--------|
|                                        |   | 2007                                           |   | 2006   |   | Change |
|                                        |   | US$                                            |   | %      |   | US$ |   | % |   | % |
| Net                Sales                    |   | 2,438                                          |   | 100%   |   | 655 |   | 100% |   | 272.25% |
| Connection                Fees              |   | 615                                            |   | 25%    |   | 118 |   | 18% |   | 421.19% |
| Gas                Sales                    |   | 1,823                                          |   | 75%    |   | 537 |   | 82% |   | 239.46% |

*Connection      fees*

----

| **Residential                Projects**                             |   | **Connected****Households** |   | **Connection****fees(1,000)** |
|---------------------------------------------------------------------|--------|-----------------------------|--------|-------------------------------|
|                                                                |   |                        |   |                          |
| Jinshi                Huayuan Project                               |   | 600                         |   | 154.4                         |
| Jinzhou                Xisanzhuang Project                          |   | 370                         |   | 72                            |
| China                Coal Geology Bureau 147 Branch, Datun, Peixian |   | 200                         |   | 54.1                          |
| Longquan                Huayuan Project                             |   | 220                         |   | 52.6                          |
| Beijing                Xingang Zhuangyuan Project                   |   | 220                         |   | 51.5                          |

*Gas      sales*

----

| ($                thousand)      |   | For                the 3 months ended March 31 |
|----------------------------------|--------|------------------------------------------------|
|                             |   | 2007                                           | 2006 |
| Gas                Sales         |   | US$                                            |   | % | US$ |   | % |
| Industrial                users  |   | $441.60                                        |   | 24% | $327.30 |   | 61% |
| Residential                users |   | 461.5                                          |   | 25% | 25.5 |   | 5% |
| Others                           |   | 919.8                                          |   | 50% | 184.3 |   | 34% |
| Total                            |   | $1,822.90                                      |   | 100% | $537.10 |   | 100% |

**Cost      of sales**

| ($                thousands)   |   | For                the 3 months ended March 31, |   |   |
|--------------------------------|--------|-------------------------------------------------|--------|--------|
|                           |   | 2007                                            |   | 2006   |   | Change |
|                           |   | US$                                             |   | %      |   | US$ |   | % |   | % |
| Cost                of Sales   |   | 1,837                                           |   | 100%   |   | 517 |   | 100% |   | 255.18% |
| Connection                Cost |   | 124                                             |   | 6.8%   |   | 20 |   | 3.9% |   | 521.0% |
| Gas                Cost        |   | 1,713                                           |   | 93.3%  |   | 497 |   | 96.1% |   | 258.8% |

----

**Gross      Income**

| (                $                thousand) |   | For                the 3 months ended March 31, |   |   |
|---------------------------------------------|--------|-------------------------------------------------|--------|--------|
|                                        |   | 2007                                            |   | 2006   |   | Change |
|                                        |   | US$                                             |   | %      |   | US$ |   | % |   | % |
| Gross                Income                 |   | 601                                             |   | 100%   |   | 137.8 |   | 100% |   | 336.14% |
| Connection                Fees              |   | 490.8                                           |   | 82%    |   | 98 |   | 71% |   | 400.82% |
| Gas                Sales                    |   | 110                                             |   | 18%    |   | 39.8 |   | 29% |   | 175.88% |

**General,      Selling & Administrative Expenses**

----

**Other      income**

**Net      Income**

**Accounts      Receivable**

**Fixed      Assets**

----

**Bank      loans**

**Liquidity      and Capital Resources **

**Item      3. **
**Controls      and Procedures**

**PART      II**

**Item      6.**
**Exhibits.**

|   | No.  |   | Description |
|--------|-----------|--------|-------------|

|   | 3.1 |   | Amended                Articles of Incorporation. (1) |
|--------|-----|--------|------------------------------------------------------------|

|   | 3.2 |   | Amended Bylaws.                (1) |
|--------|-----|--------|-----------------------------------------|

|   | 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. |
|--------|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                              |                                                                                         |                |
|-----------------------------------|----------------------------------------------------------------------------------------------|---------------------|
|                              | **SINO                GAS INTERNATIONAL HOLDINGS, INC.**                                     |
|                         |                                                                                    |           |
| Date:                May 15, 2007 | *By:*                                                                                   | */s/**Yu Chuan Liu* |
|                              | *Yu                Chuan Liu*                                                                |
|                              | *Chairman                of the Board, Director**and                Chief Executive Officer* |

|                                |                                                                       |             |
|-------------------------------------|----------------------------------------------------------------------------|------------------|
|                           |                                                                  |        |
| Date:                  May 15, 2007 | *By:*                                                                 | */s/**Chen Fang* |
|                                | *Chen                    Fang*                                             |
|                                | **Director                  and Chief Financial                  Officer** |

----