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People's Daily Online>>China Business

Country to test means of setting gas prices

By Zhou Yan (China Daily)

10:04, December 28, 2011

BEIJING - China announced on Tuesday a test reform of the system it uses to set the price of the natural gas consumed in southern Guangdong province and the Guangxi Zhuang autonomous region.

It plans to base the city-gate price of natural gas - the price a pipeline company charges a gas company for the resource - on the prices of imported fuel oil and liquefied petroleum gas.

Under the system, users can negotiate a price for natural gas with suppliers. That will be allowed to rise no higher than a ceiling price set by the government, which will be adjusted once a year at first. After that, the adjustments will come biannually and then quarterly, said the National Development and Reform Commission, China's top economic planner. The prices will vary from province to province.

The test, meant to reduce the government's influence over gas prices and increase the market's influence, went into effect on Monday.

To set the city-gate price for natural gas, the government has decided to look at the imported prices of fuel oil and liquefied petroleum gas in Shanghai, making them the initial benchmarks.

The maximum city-gate prices will be 2,740 yuan ($430) for 1,000 cubic meters in Guangdong and 2,570 yuan in the Guangxi Zhuang autonomous region.

The new system is meant to be more subject to market influences than were previous ones, in which city-gate prices were set in accordance with domestic production costs, said Lu Ying, an analyst from the oil market service provider oilgas.com.cn.

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