China Said to Plan Gas Price Cuts Up to 30% in Fuel Push

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  • Cheaper natural gas prices may start as early as Nov. 1
  • Price cut seen helping factories hurt from economic slowdown

China may cut natural gas prices for business and industrial users by as much as 30 percent as the world’s second-largest economy seeks to encourage use of cleaner fuels, according to people with knowledge of the situation.

China’s National Development and Reform Commission, the country’s economic planner, asked provincial governments to reduce city-gate natural gas prices between 20 and 30 percent, said the three people who asked not to be identified as the proposals aren’t public yet. The cuts may come as soon as Nov. 1.

As the Chinese economy grows at the slowest pace in 25 years the country is curtailing demand for commodities amid a global glut that has cut prices for oil, liquefied natural gas and other fuels. In August, PetroChina Co., the country’s biggest natural gas producer, was said to be offering large industrial users flexible prices and a promise of year-round supply as it sought to boost sales amid slowing demand.

“The price cut is overdue and should have happened months ago,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. “Lower gas prices will bring relief to gas-burning factories hurting from China’s slowing economy and help promote the country’s carbon emission deduction campaign in the longer term.”

The commission didn’t respond to questions sent by fax.

Chinese natural gas prices have remained high even as global prices have plunged, with demand growth for the fuel heading toward the lowest level since at least 1995, according to Shi. Brent oil, to which liquefied natural gas prices for delivery to Asia are often linked, has fallen about 14 percent this year.

The Xinjiang region, which has city-gate price of about 1.9 yuan (30 cents) per cubic meter, may see a price cut of around 0.50 yuan or 26 percent, two of the people said. Coastal provinces such as Guangdong, which has a city-gate price of 2.90 yuan per cubic meter, may see reductions of about 0.70 yuan, or 24 percent decline, according to the two people. City-gate prices refer to the wholesale price from production to point of sale.

China will limit coal consumption to about 4.2 billion metric tons by 2020, reducing the fuel’s share of its energy generation to less than 62 percent. Natural gas, which counts for around 6 percent now, will rise to more than 10 percent of total energy consumption by 2020.