Prices of natural gas set to rise further: analysts

China's demand for natural gas conti­nues to grow, and as exporters of natural gas have either increased their prices or reduced their supply, prices are likely to rise, analysts said Wednesday.

Australia suspended supplying natural gas to China National Offshore Oil Corporation (CNOOC), China's largest offshore oil producer, on Friday, the fourth time Australia has breached its long-term natural gas supply contract with China, the 21st Century Business Herald reported Wednesday.

Calls to the CNOOC's Investor Relations Department went unanswered Wednesday.

Analysts said the suspension was because Australia wants to charge a higher price for the gas.

In May, Indonesia called for a rise in the price of the natural gas it supplies in its long-term contract with CNOOC. Australia and Indonesia both have 25-year contracts to supply natural gas to China at a price of around $200 per ton.

The prices of natural gas imports to China have more than quadrupled in recent years, Ma Ji, a natural gas analyst at JYD Commodities Hub Co, told the Global Times Wednesday.

Low prices of gas and the low penalty cost for breach of contract are the reasons Australia and Indonesia are seeking higher prices for their gas exports, Ma said.

CNOOC is still in negotiation with Indonesia, a supplier of 2.6 million tons of natural gas to CNOOC annually, and it is likely that the price will increase by more than 70 percent, Wang Ruiqi, an industry analyst at C1 Energy, told the Global Times Wednesday.

The cost of natural gas imports will rise or even exceed the price of gas sold domestically, but imports will have to continue to meet the rising demand, Ma said.

China's natural gas imports accoun­ted for 28.9 percent of domestic demand in 2012, up 4.6 percentage points from 2011, according to data from the ­National Development and Reform Commission (NDRC).

However, the supply of natural gas imports may fall and prices are likely to increase at home as a result, Ma said.

The NDRC, the country's price regulator, announced last month an increase in natural gas prices for non-residential use starting July 10 from 1.69 yuan ($0.28) to 1.95 yuan per cubic meter. The move was partly intended to encou­rage companies to increase imports and strengthen efforts in resource exploration and development.

China's government is likely increasing gas prices to encourage rational resource utilization, Wang said.