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PetroChina to Pass on Higher Midstream Gas Costs: Bernstein

PetroChina Co., the country’s biggest oil and natural gas producer, will seek to pass on to customers the costs from its midstream businesses at Kunlun Energy Co. and liquefied natural gas transportation, according to Sanford C. Bernstein & Co.

Kunlun Energy will have to pay $10.10 per million British thermal units for the gas it liquefies in 2015, up from $6.30 now, Neil Beveridge, an analyst at Bernstein in Hong Kong, said in an e-mailed report today. Profit will remain at $10.30 per million Btu if it raises the LNG retail price for gas-vehicle owners to $24.40 in 2015 from the $20.60 now, he said.

Kunlun Energy pays a liquefaction cost of $4, which will remain constant two years from now, Beveridge said.

“PetroChina estimates that gas-price reform will result in 0.7 yuan per-cubic-meter improvement on gas prices, or 70 billion yuan ($11.4 billion) in operating income over the next three years,” Beveridge said. The increase in gas prices is forecast to raise the company’s production from 75 billion cubic meters to 100 billion cubic meters by 2015, he said.

China raised non-residential natural gas prices on July 10 to 1.95 yuan per cubic meter from 1.69 yuan, the National Development and Reform Commission said in a June 28 statement on its website.

The price reforms will reduce PetroChina’s losses from importing natural gas and improve the operating conditions of the company’s gas business, a PetroChina spokesman in Hong Kong said in an e-mailed statement.

PetroChina is already losing money on its piped natural gas imports from Turkmenistan, as it pays almost $12 per million Btu compared with a city-gate price of $8.80 in Shanghai, according to Bernstein analysts.

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