The government has moved to phase out its current practice of
pricing natural gas, with an aim to form a market-oriented pricing
mechanism in the sector.
Encouraged by the nation's top oil and gas producers PetroChina and Sinopec, and to
compensate for production costs, the National Development and Reform
Commission yesterday moved to increase natural gas prices by an
average of 5-15 percent, the most substantial price adjustment
since 1997.
Commencing next year, natural gas prices will be modified once
each year, a spokesman said.
He acknowledged that the reform of natural gas pricing has
lagged behind similar price reforms for oil, liquefied natural gas,
coal and electricity, which are more market-oriented with
government supervision.
"In the long run, natural gas prices should also be decided by
the market, not the government," said the spokesman. But he added
that the government should introduce the reform gradually because
state-owned PetroChina and Sinopec still dominate gas exploration,
gas transportation and sales on the Chinese mainland.
The commission said that price of gas used for industrial or
urban utility would rise by 0.05 to 0.15 yuan (0.6-1.8 US cents)
per cubic meter, while the price of gas used for fertilizer
production would rise 0.05 to 0.10 yuan (0.6-1.2 US cents). The
price increases went into effect yesterday.
The spokesman ruled out the possibility of a large increase in
urban family utility bills. A household that uses an average of 20
cubic meters of gas per month will pay only 3 yuan (37 US cents)
more after the price hike, he said.
Since 1978 when China began its reform and opening-up drive, the
government has begun decentralizing its pricing controls on
commodities.
Currently, market-oriented pricing mechanisms exist in more than
90 percent of commodities and services. However, the remaining 10
percent of commodities that are essential for daily life and of
national interest are priced under government guidance.
Natural gas is a major commodity on the Chinese mainland and
pricing levels are still partially controlled by the
government.
PetroChina announced last month that it plans to more than
double its current gas production to 45 billion cubic meters by
2010, or 70 percent of the country's total gas output.
The company has complained that government-set prices for
natural gas have discouraged investment in gas fields.
"The price hike is designed to encourage them to invest in
natural gas exploration," said the government spokesman.
The production of natural gas is expected to rise by an average
annual rate of 17 percent from 2005 to 2010, while the annual
growth in demand is expected to increase 26 percent during the same
period.
(China Daily December 27, 2005)