China's gas producers to benefit from gas price hike
2010-8-20
PetroChina and Sinopec will benefit from the country's move to raise the domestic onshore natural gas producer benchmark price by 0.23 yuan/cubic meter or 24.9 percent on average.
 
According to data from the NDRC, for Xinjiang oil fields and gas for West-to-East gas pipelines, the ex-factory price of the gas provided to chemical fertilizer industries and urban non-industrial sectors will be increased by 25.2 percent to 41 percent, while other gas prices will go up around 20 percent.
 
PetroChina, output accounting for 75 percent of national total, the owner of most oilfields in Xinjiang and the gas supplier for the West-to-East gas pipelines, will be the biggest beneficiary of the price hike which can ease the pressure of losses on operating the high-price imported natural gas business.
 
Following the current pricing mechanism, China's natural gas producer price and transmission fees are strictly controlled by the government, but given that surging demand has to be satisfied by more imports, which have prices much higher than domestic production, the current mechanism becomes more unsustainable. China's natural gas selling price is apparently lower than international one and Chinese gas producers have long called for the reform over China's natural gas pricing mechanism.
 
In view of this, the price hike will ensure the operation of the natural gas market and help gas producers obtain reasonable profits. It is viewed as China's first step of such reform. China has been preparing to reform its natural gas pricing mechanism since the beginning of this year, but the surging CPI, however, deterred the reform.
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