Increased imports of energy supplies, including the latest import – 65,000 tons of LNG imported by Shanghai, will raise the price of cheap domestic natural gas, analysts say.

"Domestic natural gas factory-to-buyer prices fail to reflect accurately the production cost of natural gas and returns on investment," Lin Boqiang, a researcher with the China Center for Energy Economics Research at Xiamen University, told the Global Times Sunday.

The average domestic ex-factory price in 2008 is only 42.4 percent of that in the US, 29.7 percent of that in EU and 29.9 percent of that in Japan, Lin said, adding that increased imports driven by roaring domestic demand will put pressure on the country's top economic planner, the National Development and Reform Commission, to raise prices on domestic natural gas.

The public demand for natural gas has been on the rise in recent years as more and more taxi drivers turn to natural gas because it is cheaper than gasoline, cleaner than coal, and a cheaper alternative to electricity.

Figures from the National Bureau of Statistics show that the country's yearly output and consumption of natural gas increased 8 percent and 11 percent respectively from January to November 2008. And the ratio of natural gas consumed to primary energy consumed reached 3.95 percent during the same period, up 0.18-percentage points year on year.

People's reliance on natural gas becomes more acute in winter, when temperatures drop to freezing. And China has been looking for overseas natural gas to fill a domestic supply shortage.

In November, central and eastern China faced the worst natural gas shortage in years when a severe cold wave hit unexpectedly, accompanied by heavy snow. A natural gas shortage occurred again during another snowstorm in December.

A cold snap had people shivering across the country again Sunday. Lin said the natural gas pinch would be less severe than before thanks to more overseas supplies.

On December 31, the western section of China's No. 2 West-East gas pipeline began pumping central Asian gas into the Xinjiang Uyghur Autonomous Region. The pipeline, which runs through 14 provinces, autonomous regions, municipalities and special administrative regions, is expected to deliver five to six billion cubic meters of natural gas in 2010.

A total of 65,000 tons of imported LNG arrived in Shanghai Saturday afternoon, as reported by Xinhua News Agency. Xinhua didn't disclose the origin of the LNG, but said the China National Petroleum Corp (CNPC) spent huge sums of money including the differential between the overseas purchase price and the selling price in China.

China is also buying natural gas from Russia, Kazakhstan, Burma, and other countries.

Liang Yongchang, CFO of Hong Kong-listed ChinaGas Holdings, was quoted by Reuters as saying China's natural gas price will rise 10 to 12 percent annually in the next five years [buoyed by high-price overseas natural gas].

Having anticipated the possible price hike, China's main natural gas suppliers are reshuffling their businesses and pooling more resources in natural gas transportation and supply.

Go to ForumComments