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Gas pricing reform will pump up prices: experts

12-29-2011 10:25 BJT

The government's reform of natural gas pricing mechanism will inevitably push up prices if the ongoing pilot program is extended nationwide, experts said Wednesday.

It is likely that the new pricing scheme will be applied nationwide in the second half of 2012, and domestic natural gas prices are expected to rise by an average of 0.15 yuan ($0.02) per cubic meter next year, Lin Kaisheng, an industry analyst with Shenyin & Wanguo Securities, told the Global Times Wednesday.

Currently, domestic natural gas is sold at an average price of about 2 yuan per cubic meter.

The National Development and Reform Commission (NDRC) launched a pilot program in Guangdong Province and Guangxi Zhuang Autonomous Region Tuesday to make the pricing of domestic natural gas more market-oriented.

Under the new scheme, natural gas prices will be calculated based on the price in Shanghai, which is linked to international prices of fuel oil and liquefied petroleum gas.

The NDRC said the new scheme will not affect prices much in the two regions, since they already rely heavily on imported natural gas.

"But in northern parts of China, where the prices are cheaper because of their proximity to gas pipelines, prices will see a significant increase once the new scheme takes effect," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times Wednesday.

"The government should come up with measures like subsidies for residents in order to ease the influence of the price increase," said Lin.

Lin also noted that the new pricing scheme will be good news for energy giants like China National Petroleum Corp (CNPC) and China Petrochemical Corporation.

CNPC's profits would be boosted by around 20 percent if natural gas prices were to increase by 30 percent next year, according to a report from Guotai Junan Securities Wednesday.

China's rising dependence on imported natural gas has been the major reason behind the current reform, said a report from Shenyin & Wanguo Securities Wednesday.

China imported some 12 percent of its natural gas last year, and the number is expected to grow to 40 percent by 2015. But domestic prices are far below the international level under the existing pricing mechanism.


Editor:Wang Xi |Source: Global Times

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