China to raise natural gas prices under new pricing plan

19 May 2009 10:34  [Source: ICIS news]

SHANGHAI (ICIS news)--China plans to issue a new pricing mechanism for domestic natural gas this year that would effectively raise gas prices, industry sources said on Tuesday.

The country's think tank National Development and Reform Commission (NDRC) has submitted its recommendation to the State Council in mid-May for approval, the sources said.

“It is a good chance for China to implement a price adjustment now because the current price system is very messy as the domestic natural gas prices are much less than the international prices,” said Liu Yijun, an industry professor at the China University of Petroleum.

The details of the new pricing mechanism were not yet available and has yet to be approved.

Methanol makers, which use natural gas as feedstock in production, had raised concerns that the new mechanism would likely push up their overall production costs.

“At present, the industrial natural gas prices were between yuan (CNY)1.20-1.80/cubic metres ($0.18-0.26/cubic metres), so the average cost for a local methanol producer was CNY1,900-2,400/tonne.

"The methanol production cost will increase CNY100/tonne when natural gas price increases CNY 0.1/cubic metres," according to a computational analysis from a major methanol producer in southwest China.

($1 = CNY6.83)

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By: Dolly Wu
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