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Further natural gas price rises likely
By Pan Xiaoyi |
June 3, 2010, Thursday
|
Online Edition
Online Edition
CHINA may further raise natural gas prices as it moves towards a market-based pricing mechanism, analysts said.
China raised wholesale natural gas prices by 24.9 percent to 1,155 yuan per 1,000 cubic meters on Tuesday, the first increase in more than two years. It equated to a rise of 0.23 yuan per cubic meter.
"Despite the jump, there is still a large price gap between domestically produced gas and imported," said Wu Ying, an analyst from Ping An Securities Co. "The move is a tentative attempt to precede the country's pricing-system reformation. More detailed plans involving more sectors will be rolled out in the future."
Analysts from Fitch Ratings agreed. "China's recent natural gas price increase paves the way for the market-based pricing mechanism in the foreseeable future," wrote Ying Wang, director in Fitch's Asia-Pacific energy and utilities team.
Moreover, the process of establishing such a mechanism is believed to be accelerated if imported liquefied natural gas (LNG) prices rise significantly, according to Fitch Ratings.
Yan Beina from Guosen Securities Co estimated further rises of 0.3 yuan to 0.4 yuan per cubic meter are justified in future years.
The increase in onshore natural gas prices will increase the revenue and profitability of Chinese natural gas producers who are also major LNG importers, analysts said.
PetroChina Co will be the primary beneficiary of the natural gas price increase as it accounted for about 88 percent of onshore production in 2009.
"Natural gas is expected to be a key strategic focus and an important revenue and cash flow driver for PetroChina in the coming years, as the company leverages on its significant proven gas reserves and extensive pipeline network," Fitch said in the report.
Natural gas consumption amounted to 90 billion cubic meters in 2009 and Fitch expects China's natural gas demand growth to remain strong at 8 percent to 10 percent annually for the next few years, with imported natural gas accounting for an increasing share of domestic gas consumption.
China raised wholesale natural gas prices by 24.9 percent to 1,155 yuan per 1,000 cubic meters on Tuesday, the first increase in more than two years. It equated to a rise of 0.23 yuan per cubic meter.
"Despite the jump, there is still a large price gap between domestically produced gas and imported," said Wu Ying, an analyst from Ping An Securities Co. "The move is a tentative attempt to precede the country's pricing-system reformation. More detailed plans involving more sectors will be rolled out in the future."
Analysts from Fitch Ratings agreed. "China's recent natural gas price increase paves the way for the market-based pricing mechanism in the foreseeable future," wrote Ying Wang, director in Fitch's Asia-Pacific energy and utilities team.
Moreover, the process of establishing such a mechanism is believed to be accelerated if imported liquefied natural gas (LNG) prices rise significantly, according to Fitch Ratings.
Yan Beina from Guosen Securities Co estimated further rises of 0.3 yuan to 0.4 yuan per cubic meter are justified in future years.
The increase in onshore natural gas prices will increase the revenue and profitability of Chinese natural gas producers who are also major LNG importers, analysts said.
PetroChina Co will be the primary beneficiary of the natural gas price increase as it accounted for about 88 percent of onshore production in 2009.
"Natural gas is expected to be a key strategic focus and an important revenue and cash flow driver for PetroChina in the coming years, as the company leverages on its significant proven gas reserves and extensive pipeline network," Fitch said in the report.
Natural gas consumption amounted to 90 billion cubic meters in 2009 and Fitch expects China's natural gas demand growth to remain strong at 8 percent to 10 percent annually for the next few years, with imported natural gas accounting for an increasing share of domestic gas consumption.
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