China Raises Natural Gas Price by 25%, Lowers Oil Prices     

China raised domestic onshore natural gas benchmark prices by 25% to RMB1.16 per cubic meter from RMB0.93 per cubic meter, effective June 3rd.
   An official of the National Development and Reform Commission (NDRC) in charge said the increase in the ex-factory gas prices was to reflect the scarcity of domestic gas resources which could not meet the rising demand. The price hike also came as domestic gas prices were well below other alternative fuels - for example, only a third of fuel oil prices, or half the prices of imported natural gas. In addition, the supply and demand situation has become an increasingly big problem in China as the artificially low gas prices see many projects using gas as feedstock come on stream across China in recent years, which have led to the excess growth in gas demand and caused shortages in certain areas.
   China is expected to import more than 15 billion cubic meters of gas this year, according to the NDRC. And China has to import gas to meet its demand over the next decade.
   Energy analysts said this move would help the government to win its goal of raising the share of gas to 10% of China's energy needs by 2020 from 3% in 2005. The price hike this time may prompt PetroChina Co. and Sinopec Corp., China's two main on shore gas suppliers, to boost production.
   Urea producers who use gas as raw materials said their costs will raise but still be lower than those who rely on coal even the gas prices are higher now.
   Meanwhile, the NDRC announced it lowered the prices for gasoline and diesel by RMB230 per ton and RMB220 per ton from June 1st. In Beijing, the ceiling price for the 93-octane gas is RMB8 390 per ton, and that for the zero-grade diesel is RMB7 730 per ton.
   With the price change actions, the balance between natural gas and refined oil products prices becomes more rationalized.