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Gas price hike on cards

By Xiao Wan (China Daily)
Updated: 2009-03-20 07:54

A natural gas production site in Central China. Hu Qingming

China will raise gas prices within the year, industry insiders said yesterday. The current low price scenario for natural resources offers a good opportunity to make price adjustments now, they pointed out.

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It is the right time for China to hike natural gas prices, said Lin Boqiang, energy professor with Xiamen University. Since the prices of gasoline and diesel are relatively low now, any rise in the price of natural gas will not affect domestic consumers much, he said.

The country should further reform its natural gas pricing mechanism to ensure healthier development of the industry. Currently, the pricing system is "very messy", Lin said.

"I believe this round of price adjustment will not be very huge," he said.

The State-capped natural gas prices are less than half of the international prices. The National Energy Administration (NEA) had said earlier that reforming the gas pricing system would be "its key task this year".

NEA head Zhang Guobao had said "China should build a reasonable natural gas pricing mechanism as soon as possible".

Analysts said the country's rising imports of the fuel would end up further linking its gas prices to the international prices.

Last year, China started building its second west-east gas pipeline, the largest of its kind in the world. The project will cross 14 provinces, autonomous regions and municipalities. It will carry 30 million cu m of natural gas every year from Central Asia and Xinjiang to the eastern and southern areas, including Shanghai and Guangdong.

The price of natural gas imported from Central Asia through the pipeline would be higher than current gas prices in China. PetroChina, the project builder, is now conducting studies to decide the terminal gas cost of the project, an official with the company told China Daily yesterday.

"It (the terminal price of the second pipeline) will be higher than the current prices," said the official, who did not want to be named.

Zhang Guobao, also vice-minister of the National Development and Reform Commission, said in February that the government would work out the terminal price of the second pipeline by the end of this year.

China's production of natural gas rose 12.3 percent year-on-year to 76.1 billion cu m in 2008 as the government promoted cleaner energy, according to the China Petroleum and Chemical Industry Association. The annual growth rate was down from 23.1 percent in 2007.

The country will increase its natural gas production to 120 billion cu m in 2011, a three-year plan chalked out by the NEA has outlined.