Oct 16, 2012
Translated by Zhu Na

Yesterday's announcement by the National Bureau of Statistics that China's Consumer Price Index (CPI) increased by less than 2 percent in September has led to an accelerated push to implement reform of resource pricing so that market forces play a greater role in setting prices.

A plan to expand the area in which a new system is used to determine the price of natural gas has been submitted to the relevant national departments and may be announced as soon as the end of this year according to a report in today's Securities Daily.

The paper quotes an unnamed source as saying that Sichuan and Chongqing are expected to be included in the second phase of the new pricing system after initial trials in the southern regions of Guangdong and Guangxi.

Though some companies in the gas industry have argued that each province should have its own price, the paper quotes a natural gas analyst named Pu Deqin (蒲德琴), from commodity e-commerce platform 315.com.cn, as saying that this is the general direction in which the policy appears to be heading, but he said it was unlikely that such a policy would be implemented right away.

Pu was also quoted as saying that the current natural gas industry is mainly involved in the mining of shale gas and that such exploration and development requires advanced and expensive technology. Pu said that it was hard for private capital to enter this field and that currently investment in pipelines and resources are dominated by large state-owned enterprises. Pu said there is still a long way to go before the sector is opened up to private capital.

However, the introduction of a certain price for individual provinces would likely encourage more companies to become involved in the sector.

The southern province of Guangdong and the southwestern autonomous region of Guangxi both began to trial the use of the new natural gas pricing system in December 2011. According to the new system, the price of natural gas is determined by market forces, though it is capped and cannot exceed a certain limit.

Links and Sources
Securities Daily: 天然气价改方案最快年底公布 一省一价可能不大