China to link natural gas price with oil

17:06, March 05, 2010      

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Zhang Guobao, CPPCC member and head of the National Energy Administration (NEA), made it clear March 4 that China's natural gas price will be linked to the oil price. In regards to the current oil price trend, Zhang said that it is involved with too many financial factors and the price does not fully reveal the relationship between supply and demand.

Zhang also disclosed that China and Russia have reached an agreement on prices for natural gas to be imported from Russia, which is a key issue in the natural gas negotiations between the two sides. Many detailed commercial terms still need further negotiation.

As early as 2006, China and Russia had signed a Memorandum of Understanding (MOU) which stipulates that Russia would supply natural gas to China and build two gas pipelines leading to China. However, the two sides had not concluded the price negotiations because of price differences.

The shortage of natural gas was seen in various areas across China during the recent winter. Zhang responded that China will strive to avoid the shortage of natural gas in future winters mainly by increasing the supply.

As for the current oil price trend, Zhang believes that it is involved with too many financial factors and the price does not reflect the relationship between demand and supply. But he also stressed, "The current oil price generally remains stable around 80 U.S. dollars, which is much more rational than the peak price of 147 U.S. dollars prior to the international financial crisis in 2008."

By People's Daily Online
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