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CNPC denies cutting gas supply

By Song Shengxia (Global Times)

10:04, May 07, 2013

China National Petroleum Corporation (CNPC), the country's largest natural gas producer, denied Monday that it has reduced gas supplies as a precursor to raising prices, saying that it will supply gas as scheduled.

"The supply of natural gas in winter is huge, due to the demand for heating. The company often has to provide an oversupply of gas to make sure residents' heating will not be affected during the winter," Li Zhanbin, a spokesman for CNPC in Beijing, told the Global Times Monday.

"But starting from May 1, it will be a slack season for gas demand and we will switch back to the original supply plan. So any change in the supply is not a result of deliberate restrictions," Li said.

Beijing-based Securities Daily reported Monday that CNPC started cutting natural gas production nationwide from April to minimize losses.

This came after the State-owned Assets Supervision and Administration Commission, the State assets watchdog, ordered CNPC to reduce losses from its gas operation, the report said, citing an internal CNPC document obtained by the paper.

According to the report, CNPC's sales subsidiary for North China decided to cut gas supply by 26 percent from May 2 due to a shortage of upstream gas supply.

The report cited analysts who said that CNPC was restricting supply in order to pave the way for price hikes in the future.

"As more users are switching to natural gas from fuel oil, such as taxis in parts of North China, CNPC has to spread its planned supply quota across a larger number of users," Li Lingxuan, an analyst with Shandong-based industry research agency SCI, told the Global Times Monday.

"It creates an impression that CNPC is cutting the supply of gas. But there will definitely be a gas price hike later in the year," Li said.

Rumors of a price hike spread in late March, with media reports saying that the retail price of natural gas would be raised by some 30 percent to 3.5 yuan ($0.57) per cubic meter across China from April.

It sparked a natural gas buying frenzy in some cities.

On March 27, the National Development and Reform Commission (NDRC), which oversees pricing matters in the country, dismissed the rumor, saying any change to gas prices would first need to undergo public consultations.

Despite the official denial, in April some cities including Changchun, capital of Northeast China's Jilin Province, Handan, North China's Hebei Province, and Wuxi, East China's Zhejiang Province hiked gas prices.

Tianjin Municipality also held public hearings over a possible 9.1 percent price hike.

"The retail price of gas in many cities hasn't changed since 2010. Raising the price will help the country's gas producers reduce their losses," Li said.

CNPC reported a profit of 1.1 billion yuan from its natural gas and pipeline operations in the first quarter, down 45 percent year-on-year, and a loss of 14.45 billion yuan from its natural gas imports, up more than 40 percent year-on-year.

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