Gas companies see share boost

Gas producers and distributors saw a rise in their share prices Monday following market speculation that China will raise natural gas prices as the country moves to push forward with energy reform.

Starting from April, China will raise the retail price of natural gas substantially to a range of between 3 and 3.5 yuan ($0.48-$0.56) per cubic meter, Beijing-based China Business Times newspaper reported Monday, citing industry insiders.

Some listed gas distributors including Shaanxi Provincial Natural Gas, Shenzhen Gas Corp and Changchun Gas saw a rise in their share prices of between 3.7 and 8.9 percent Monday following the news, compared with a 0.07 percent fall in the benchmark Shanghai Composite Index.

Meanwhile, PetroChina, China's top natural gas producer and largest importer of foreign gas, also saw its share price move upward by 0.45 percent Monday.

"PetroChina will benefit from the raised price, which will help the company reduce losses in its import business," Wang Ruiqi, a natural gas analyst with market intelligence agency ICIS C1 Energy, told the Global Times Monday.

PetroChina imports half of the foreign gas that China uses annually, but the higher price of imported gas than domestic gas led to a loss of 2.1 billion yuan for the company's gas business in 2012, according to the company's yearly report.

Many people complained on Weibo Monday that a rise in the price of natural gas will increase living costs. If the retail price is raised to 3 yuan per cubic meter, it will mean that Beijing residents will have to pay an additional 200 yuan for their annual gas bill, based on an average monthly consumption of 20 cubic meters.

The press officer for the National Development and Reform Commission (NDRC) told the Global Times Monday that she was unaware of any new natural gas price plan.

The central government has been trying to reform the State-set pricing mechanism for energy products, including natural gas, to make it more market-driven.

In May 2010, the NDRC raised the domestic gas price by 24.9 percent to 1,155 yuan per 1,000 cubic meters.

However, the price for most residents remained the same for fear of boosting inflationary pressures.

A price adjustment mightalso involve rising costs for industrial users such as chemical factories and power plants, and might prompt them to adopt energy-saving methods, said Li Lingxuan, a natural gas analyst with Sublime China Information.

However, it is likely that the additional costs will be passed onto downstream users over the long run, Li told the Global Times Monday.

China's natural gas supply has fallen behind the growth in its consumption, but domestic producers are less motivated to increase output due to the low price.

A market-driven price would help to encourage domestic gas producers to increase supply to meet the fast-growing demand, according to a research report released last week by Guotai Junan Securities.