(Updates with background, company RICs)
By Judy Hua and David Stanway
BEIJING, March 21 China will introduce tiered
natural gas pricing for residential use by the end of 2015, as
the world's biggest energy user moves to reduce consumption and
raise revenues for companies supplying city gas.
The reforms are part of a broad plan by Beijing to bring
regulated domestic fuel prices more in line with those on the
global market. The move to a nationwide tiered pricing scheme
for residential gas also follows pilot reform programmes
launched in six cities in Jiangsu province last year.
The National Development and Reform Commission (NDRC), the
top economic planning agency, said three pricing bands would be
introduced by the end of next year. The first would apply to 80
percent of average monthly household volumes, and the second to
the next 15 percent. The third-tier price would kick in for any
volumes more than 95 percent of the monthly household average.
The NDRC said that city gas suppliers, including the Hong
Kong-listed China Gas Holdings and ENN,
could use the increasing revenues to help offset the rising cost
of storage and the purchase of liquefied natural gas (LNG).
"Towngas companies will be the biggest beneficiary," said an
analyst with China's largest gas producer CNPC.
A 2011-2015 "five-year plan" for natural gas said that
higher prices would be crucial to encourage firms like
PetroChina to source more gas from abroad
and also invest more in domestic exploration and production, but
China has so far been moving slowly to cushion the impact on
China hiked the price of imported natural gas by more than a
quarter last November in a bid to encourage more pipeline
deliveries by PetroChina, which had been running its natural gas
import business at a loss. It also raised prices for industrial
and commercial use last July.
But household gas prices have been capped at much lower
levels than those for non-residential users, which the NDRC said
has led to supply distortions and waste.
That in turn has helped to strain domestic gas supplies and
increase the need for imports, which accounted for more than 30
percent of China's gas consumption last year.
Under the current pricing scheme, the more gas households
consume, the more subsidies they can enjoy. The NDRC said less
than 5 percent of households now consume nearly 20 percent of
the total residential gas supplies.
Promoting natural gas use has become a key priority in the
world's top energy consumer as it tries to reduce pollution and
ease its dependence on coal-fired power stations. Authorities
are seeking to raise the share of natural gas in its energy mix
to 8 percent by 2015, from around 5 percent now.
With demand soaring as more cities switch to gas from coal
for heating and power, the share of imports in overall natural
gas use is expected to rise to 35 percent by 2015.
(Editing by Tom Hogue)