NDRC: open pricing to spur exploration, production

China will give unconventional natural gas pricing rights to producers and downstream users, which will boost exploration and production, the country's economy planner said on Tuesday.

Producers of shale gas, coal-bed methane, coal gas and imported liquefied natural gas will be able to sign contracts for purchases and transportation, the National Development and Reform Commission said.

The upstream companies and users can decide on contract prices instead of applying the standard pipeline prices set by the authorities, which means the government has opened up the pricing mechanism for unconventional natural gas, including gas delivered through pipelines.

According to the commission's regulation of 2013, shale gas, coal-bed methane, coal gas and LNG sold via pipeline had to follow the same national natural gas pricing mechanism.

Han Xiaoping, chief information officer at China Energy Net Consulting Co Ltd, said the new policy will have a huge positive impact on China's unconventional natural gas market, saying shale gas companies, including China National Petroleum Corp and China Petrochemical Corp, will expand their efforts to explore unconventional natural gas.

"The new rule will help private companies producing unconventional natural gas to enter the pipeline transportation system, which is dominated by the State-owned giants, such as CNPC," he said.

Wang Xiaokun, an analyst for domestic commodities consultancy Sublime China Information Co Ltd, said the new policy will primarily benefit LNG importers, coal-bed methane companies and coal gas producers.

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