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China May Raise Natural Gas Prices This Year, Barclays Says

China may increase natural gas prices this year as the government takes a more “market-based approach” to meeting demand for the cleaner-burning fuel, according to Barclays Plc. (BARC)

The cost difference between imported liquefied natural gas and China’s domestic onshore pipeline supplies may gradually narrow as new pricing models are introduced in more provinces, Barclays said in an e-mailed report today. Higher-than-expected inflation and oil prices may cause the government to delay revisions to next year, it said.

China, the world’s biggest energy user, plans to revise its government-controlled price mechanisms to encourage more efficiency, curb pollution and reduce financial losses on imports. Beijing suffered record air pollution this month. PetroChina Co. in October cited the cost of imports including LNG and Central Asian gas for its lowest third-quarter profit in at least five years.

“Recent environmental concerns, a tight natural gas market with strong demand growth and the country becoming more dependent on pipeline and LNG imports point to an acceleration of natural gas reforms in China this year,” Scott Darling, an analyst at Barclays in Hong Kong, said in the report. “As such, we see natural gas pricing hikes this year.”

Consumers in Guangdong and Guangxi provinces in southern China pay as much as 2,740 yuan per 1,000 cubic meters for gas under a trial program introduced by the National Development and Reform Commission, the nation’s top economic planner, in December 2011. The NDRC said the program would be evaluated and extended nationwide.

To contact Bloomberg News staff for this story: Jing Yang in Shanghai at jyang251@bloomberg.net

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

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