Natural gas prices go up

Move will boost supply, benefit importers

China announced Tuesday a 20.5 percent rise in natural gas price for non-residential use, marking another step in a reform to make the gas prices more market-driven.

The price hike is expected to boost imports and output of the cleaner fuel in one of the world's largest energy consumers, analysts said.

Effective from September 1, the gas price for industrial and commercial users will increase by 0.4 yuan ($0.06) per cubic meter, the National Deve-lopment and Reform Commission (NDRC), China's top economic planner, said in a statement on Tuesday.

The price adjustment is based on the amount of gas consumed in 2012, while the price for newly added gas consumption will remain unchanged.

After the adjustment, the price of non-residential natural gas will rise to 2.35 yuan per cubic meter at gas stations, according to the Xinhua News Agency's calculation.

The price hike also exempted more sensitive consumers such as households and fertilizer producers.

This is the second important step to make the gas price fully market-driven by 2015, the NDRC said.

The latest hike came after a similar 15.4 percent increase for non--residential gas consumers in July 2013 when the NDRC launched a new pricing mechanism.

"The price hike will benefit gas producers including PetroChina and Sinopec as it will reduce losses of their import business," Wang Xiaokun, a natural gas analyst with consulting firm Sublime China Information, told the Global Times on Tuesday.

Under the current pricing system, the gas price is artificially kept lower than the cost of imports as the government fears that higher energy prices will lead to inflation that could jeopardize the economy.

However, the government-controlled gas prices discourage importers and producers to increase imports and output to meet the country's growing demand for cleaner fuel.

Market-based gas prices will spur gas imports to meet the growing domestic demand for the cleaner fuel, Wang said.

China imported 53 billion cubic meters gas in 2013, accounting for about 30 percent of its total gas consumption, and the demand will further grow given the need to fight against air pollution, the NDRC wrote in the statement.

Average gas consumption is growing 15 percent annually in China, and the domestic gas output can no longer meet the demand, according to the NDRC.

The price hike is expected to add 44.8 billion yuan in revenues for gas importers and producers, yet it will add pressure on the downstream industrial users, Sun Yang, an analyst at chem365.cn, an energy market intelligence service provider, told the Global Times on Tuesday.

"This price adjustment will have no impact on consumers as the price for residential users remains unchanged," the NDRC wrote, noting the rise in costs for industrial users will spur industrial restructuring and eliminate redundant energy-consuming capacity.

China's energy consumption per unit of GDP declined 4.2 percent year-on-year in the first half of this year, the largest fall since 2009, official data showed on Tuesday, marking a significant progress in energy saving and pollution control.

Even after the price uptick, the natural gas is still competitively priced compared with its substitutes including fuel and liquefied petroleum gas, and therefore the impact on the industrial sector is limited, the NDRC said.