Official: Natural gas price hike needed for rational resource allocation

16:26, June 01, 2010      

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The National Development and Reform Commission (NDRC) has decided to increase the benchmark prices for domestically-produced onshore natural gas from 925 yuan per 1,000 cubic meter to 1,155 yuan per 1,000 cubic meter, an increase of 230 yuan per 1,000 cubic meters or almost 25 percent.

An official from the NDRC said that, in light of the scarcity of natural gas resources and serious natural gas supply shortages in China, the moderate rise in natural gas prices is quite necessary and urgent for the rational and effective allocation of natural gas resources.

China's per capita possession of natural gas resources is less than 10 percent of the world's average. After China became a natural gas net-importing country in 2006, the import volume has continued to grow. In 2009, the rate of China's dependence on natural gas imports already has exceeded 8 percent. China's natural gas import volume is expected to top 15 billion cubic meters in 2010.

Meanwhile, domestic natural gas prices were much lower than that of alternative energy. Internationally, the ex-factory natural gas prices are generally about 60 percent of crude oil prices, while the ex-factory benchmark prices for domestically-produced onshore natural gas in China are just around a quarter of that for crude oil in the international market. Domestic natural gas prices are just a quarter of liquefied petroleum gas prices, one-third of the fuel oil prices and about a half of imported natural gas prices.

As domestic natural gas prices were much lower than that of other alternative energy, the demand for natural gas has increased too fast. "Price is the most sensitive and direct signal in guiding the allocation of market resources. A moderate rise in natural gas prices is necessary and urgent to rationally and effectively allocate natural gas resources, promote resource conservation and ensure natural gas production and supply," the official said.

The official noted that against the backdrop of rapid economic recovery and the overall low price level, timely response to long-standing pricing issues will not only promote resource conservation and environment protection and curb the overly fast development of energy-intensive industries, but it will also help to change China's economic development mode. Furthermore, it can also control the impact of the price adjustment on the overall price level within the bearable range.

In addition to the moderate rise in ex-factory benchmark prices for domestically-produced natural gas, natural gas pricing management policies have improved. The "dual-track" natural gas pricing mechanism has been canceled and price-float range has been expanded to allow producers and buyers to fix specific natural gas prices based on the ex-factory benchmark prices, raising or lowering the benchmark prices by the maximum of 10 percent. This can further simplify natural gas pricing management and make the prices fairer.

The official added that according to a survey conducted by the China Gas Association, the average monthly cooking-related natural gas consumption volume is around 20 cubic meters per household. If the urban natural gas sales price is up by 0.23 yuan per cubic meter, the average monthly natural gas consumption cost will be up by about 4.6 yuan per household. Each region should make an overall arrangement to allocate related allowance to low-income residents in order to ensure that the natural gas price adjustment will not lower their living standards.

By People's Daily Online


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