PetroChina to gain from higher Beijing gas tariffs
PetroChina, the nation's biggest natural gas supplier, will be the main beneficiary of Beijing's decision to raise non-residential gas prices nationwide by an average 15 per cent from July 10.
The biggest losers are new gas users and those that plan to increase their usage substantially this year, as the prices for this year's incremental demand will be subject to much steeper increases.
"This is significantly positive for all gas producers, most of all PetroChina," said CLSA head of Asia oil and gas research Simon Powell.
PetroChina contributed 68 per cent of the nation's gas output last year. The firm lost 42 billion yuan (HK$53 billion) last year, or 1.50 yuan per cubic metre on 28 billion cubic metres (bcm) of gas it imported at much higher prices than domestic prices.
According to a Citi research report, PetroChina may import 34 bcm of gas this year.
The price rise could mean 26 billion yuan in extra revenue on an annualised basis this year, assuming sales growth of 10 per cent and that 80 per cent of its sales are non-residential, based on calculations by the South China Morning Post. This will be offset by nine billion yuan of losses on incremental imports.
Beijing last Friday said average non-residential gas prices charged at the city-gate level would be raised to 1.95 yuan per cubic metre from 1.69 yuan, the first nationwide rise since mid-2010. Residential prices will not change.
This is the first time that gas prices have been regulated at city gates, where ownership of gas changes hands from pipeline operators to distributors. Previously, Beijing stipulated ex-factory gas prices and pipeline transmission fees. It has kept prices about 40 per cent lower than the levels in developed Asian nations to protect users.
Regulator National Development and Reform Commission said it aimed to fully liberalise gas prices by 2015.
The latest reform entails a two-tier system. Prices of volumes up to last year's non-residential sales of 112 bcm can be raised by 40 fen per cubic metre. Sales to fertiliser makers will cost 25 fen more.
Prices of incremental demand this year, estimated at 11 bcm, will be set at 85 per cent of the average price of liquefied petroleum gas and fuel oil - two main alternatives to natural gas whose prices are linked to that of crude oil.
The NDRC said the reform was needed since regional markets were increasingly served by multiple gas sources and pipelines.