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  • Oct 23, 2014
  • Updated: 11:11am
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ENERGY

Gas price reform to go nationwide

Beijing expected to expand pilot scheme, letting suppliers to pass costs of imports on to users

PUBLISHED : Tuesday, 16 October, 2012, 12:00am
UPDATED : Tuesday, 16 October, 2012, 4:03am

Beijing is set to roll out gas pricing reforms to Sichuan and Chongqing, which could push up prices and boost revenues for gas suppliers.

The National Development and Reform Commission (NDRC) is expected to approve the pricing mechanism adopted by pilot provinces Guangdong and Guangxi and expand it to more areas, including Sichuan and Chongqing, the Shanghai Securities News reported yesterday.

Under the scheme, the price of natural gas price is linked to market price of "alternative energies" - international prices of fuel oil and liquefied petroleum gas - instead of being stipulated by the top economic planner.

Beijing launched the reform last year as its reliance on imported gas grew, and its rigid pricing structure made it tough for state gas producers to pass on the higher import prices to end-users.

If the scheme goes nationwide, natural gas prices could rise by an average of 15 fen (18 HK cents) per cubic metre this year, from the present average of two yuan per cubic metre, according to Shenyin & Wanguo Securities analyst Lin Kaisheng.

The move is expected to benefit China National Petroleum Corp (CNPC), the nation's biggest gas producer, as well as local gas wholesalers, analysts said. Shares of CNPC subsidiary PetroChina rose 0.11 per cent in Shanghai and 0.77 per cent in Hong Kong trade yesterday.

PetroChina's operating profit from its gas and pipe business slumped 84.7 per cent in the first half of this year from a year ago, mainly due to losses from imported natural gas.

China became a net importer of natural gas in 2006. More than 12 per cent of its natural gas demand is met by imports, which are expected to rise to over 40 per cent by 2015, according to NDRC estimates.

Lin Boqiang, director of the China Centre for Energy Economics Research at Xiamen University, said "China should push ahead with the reform" before higher prices and imports posed a bigger problem for the people and the economy. Lin said it was the right time for the nation to reform the distorted resource pricing scheme as inflation was not a serious threat.

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