China to Establish Market-Based Natural Gas Price Mechanism

China will establish a natural-gas pricing mechanism that reflects availability of resources and market supply and demand this year, according to the nation’s top economic planner.

The government will price gas with reference to other energy costs, the National Development and Reform Commission said in a statement on its website today.

Gas importers typically buy at international rates that are higher than the fixed domestic prices they can charge customers. China has vowed to reform its energy pricing to improve efficiency of fuel usage.

“It’s likely the country will increase natural-gas prices again this year if inflation is contained,” Wang Aochao, head of China research at UOB-Kay Hian Ltd., said by telephone from Shanghai today.

The world’s second-biggest energy user raised gas prices by 25 percent in June 2010, the first increase in more than two years, after higher imports boosted costs for domestic suppliers. PetroChina Co., China Petroleum & Chemical Corp. (600028) and Cnooc Ltd. (883), are the nation’s largest gas distributors.

The government will accelerate power-price reforms and increase charges for households that are heavy consumers of electricity, according to today’s statement. It will develop more market-oriented rules for oil products and improve the mechanism for pricing alternative energy, the NDRC said.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net.

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