Dec. 27 (Bloomberg) --China, the world’s largest energy user, is implementing a price ceiling for natural gas sold in Guandong and Guangxi provinces as part of trial that may extend across the country.
Consumers in Guangdong’s cities will pay a limit of 2,740 yuan ($433) per 1,000 cubic meters for gas, according to a statement from the National Development and Reform Commission on its website today. Urban users in Guangxi will be charged as much as 2,570 yuan per 1,000 cubic meters, according to the Commission announcement. The country will evaluate the pricing in the two provinces and introduce it nationwide, the NDRC said, without giving a time frame.
China has vowed to reform its energy pricing to encourage more efficient fuel use by matching international levels. Gas importers are losing money as they typically buy at overseas rates that are higher than the fixed domestic prices they can charge customers. The country uses a combination of piped supplies and shipments of liquefied gas from terminals along the East Coast.
“Guangdong and Guangxi are now getting imported gas through the Central Asia pipeline and supplier PetroChina will be able to make some profit at those prices,” Shi Yan, a Shanghai-based analyst with UOB Kay Hian Ltd., said by telephone today.
The price in the two southern provinces is derived through a formula that sets a benchmark gas level in Shanghai by calculating the costs of imported fuel oil and liquefied petroleum gas in the city, according to the NDRC.
A transportation cost will then be applied to the Shanghai price to reach the final cost for the regions, according to the planner.
“The prices will be higher than people pay currently for those imported from Australia, but still lower than sources in other projects, so the prices are competitive and generally won’t increase the consumer burden,” the NDRC said in a separate statement explaining the change.
The price ceilings apply to both domestic-produced gas and that imported via pipelines, according to the statement. The government will adjust the level once a year at the beginning and then gradually increase the frequency to once half a year or quarterly, it said.
PetroChina Co., China Petroleum & Chemical Corp. and Cnooc Ltd., are the nation’s largest gas producers.
--Winnie Zhu, with assistance from Chua Baizhen in Beijing and Jing Yang in Shanghai. Editors: Christian Schmollinger, Mike Anderson
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