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China's natural gas prices set to go up

By Xiao Wan (China Daily)
Updated: 2009-01-13 07:43

China will reportedly raise natural gas prices within the year in an effort to ensure healthier profits for the sector, the Shanghai Securities News reported, citing unnamed sources.

The country's largest oil and gas producer, China National Petroleum Corp (CNPC), has suggested that the central government take that route, said the report.

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"We have suggested accelerating the reform on natural gas pricing system a long time ago, and the government is at present studying the issue," one source with CNPC was quoted as saying by the newspaper. "After the reform, natural gas prices of CNPC, Sinopec and China National Offshore Oil Corp will become almost the same," he said.

Compared with prices of other natural resources such as oil and coal, natural gas prices are relatively low, said Lin Boqiang, an energy analyst with Xiamen University. The pricing mechanism is subject to further reform so it can match its international counterparts.

Natural gas prices are currently around one third of the price of crude oil. In western countries, the price is around 60 percent of crude oil prices.

Analysts said a price hike would be a boon for China's big producers CNPC and Sinopec, as their production of natural gas has seen a rapid increase in recent years.

In 2008, CNPC produced about 2.1 trillion cubic feet of natural gas from its domestic fields, an increase of about 14 percent over 2007.