China’s National Development and Reform Commission (NDRC) has announced that, effective July 10, citygate gas prices will increase by an average of 15 percent across the country. The increase will be borne by the industrial and other sectors, according to Far East Energy Corporation, a coalbed methane company operating in Shanxi Province, China, which stands to benefit from the increases.
According to the US Energy Information Administration, “citygate” is a point or measuring station at which a distributing gas utility receives gas from a natural gas pipeline company or transmission system.
The NDRC is introducing a two-tier pricing structure that will base new, incremental, gas supply on the pricing formula that has already been tested in provinces such as Guangdong.
These reforms apply to citygate pricing, but analysis in the market indicate that the 15 percent increase in citygate prices should equate to a near 25 percent increase in well-head prices. This probably will provide an incentive for increased exploration and production of China’s domestic gas resources, as opposed to the options of importing more liquid natural gas (LNG) and/or piping gas into China.
According to Far East Energy, the changes to China’s gas price policy underline the determination by the country’s leadership that gas play a major role in the country’s energy mix moving forward. Higher gas prices are needed to stimulate more domestic production and compensate for high LNG import prices.
In other energy news from China, a representative of the Natural Resources Defense Council signed an agreement with Beijing Energy Conservation and Environmental Protection Center to collaborate on an energy efficiency program for Beijing that would cut demand for electricity by 800 MW by 2015. The Natural Resources Defense Council, which has been working in China for nearly 20 years, will provide expertise and experience in US best practices to help improve demand side management for Beijing, a city of 20 million whose population has been growing by 600,000 persons annually.
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