China lifts natural gas prices sharply
Updated: 2007-11-14 14:09
China has raised the price of natural gas for industrial use and transportation by as much as a third in some areas, the first increase in over 22 months, but spared homeowners already reeling from quickening inflation.
From Saturday the price of natural gas at the factory gate -- or the pipeline mouth -- will rise by an unexpectedly large 0.4 yuan ($0.54) per cubic metre, China Securities Journal reported on Tuesday, citing informed but unnamed sources.
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"This is a huge increase, because people have been talking of a 10 percent increase and this 40 cents is way above 10 percent in some areas," said Yan Kefeng, analyst at Cambridge Energy Research Associates in Beijing.
The government has pledged to eventually free up prices, but has been reluctant to act because of inflation concerns.
It was forced into an unexpected 10 percent hike of domestic motor fuel prices two weeks ago by widespread shortages and rationing and said then that it would also adjust gas prices.
The increase should be a boon for China's big producers PetroChina and Sinopec, although domestic natural gas production still makes up a small portion of their overall operations and the rise had little impact on their share prices in a weak Hong Kong market.
Some of the gain, which many investors had already priced in, will likely be shared by transmission and marketing companies.
There were no details of the increase on the website of the National Development and Reform Commission, the country's top energy and economic planner. Its spokesman could not be reached on Tuesday.
Recent international deals to buy liquefied natural gas for the booming southeast at international prices were a sign that Beijing was committed to its promise to eventually free up resource price controls to improve efficiency, Yan said.
"We see it as an inevitable trend, the gas price will not stop here... We see the residential sector is able to afford higher gas prices, though the power sector is not," he added.
However with concerns growing about high inflation, few expect rapid change.
Data on Tuesday showed soaring food costs pushed China's inflation back to a nearly 11-year high in October, adding to worries that rising costs to consumers could undermine social stability.
Provincial vairations
In the southwestern city of Chongqing, gas prices for industrial users were up 0.42 yuan per cubic metre to 1.67 yuan, while in nearby Chengdu industrial firms had to pay 1.66 yuan per cubic metre, an extra 0.43 yuan, the report said.
However in Hubei province, drivers who filled up with natural gas were paying about 3.35 yuan per cubic metre for the fuel.
China is keen to increase use of the fuel, which is much cleaner-burning than the coal which provides most of its energy.
But despite annual output increases of around 20 percent, it is still struggling to keep pace with rising demand, and concerned about a growing dependence on foreign supplies.
Plans for a pipeline from Russia have stalled because of arguments about pricing, and one of the country's most senior energy officials recently hinted China might limit expansion of gas fuelled capacity.
"China's natural gas supply is comparatively tight, and it will be used mostly for civil purpose and indispensable industrial projects," Chen Deming, deputy chief of China's National Development and Reform Commission, said during a recent visit to a gas-fired heat and power plant in Beijing.
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