Gas Supply Security and Business Achievements
New Natural gas Pricing Policy in 2011
ENN 新奥
Content
A pilot reform on the pricing policy of natural gas was
launched on 26 Dec 2011 in Guangdong Province and
Guangxi Autonomous Region, with unified ceiling city-
gate prices set at RMB2.74/m³ and RMB2.57/m³
respectively
The price ceilings apply to both domestic-produced
gas (including unconventional gas, eg. Shale gas, CBM,
coal gas etc.) and imported gas transmitted through
pipelines
Retail prices remain at the control of the local
government, and it is suggested to establish an auto
pass-through pricing system
Pricing Mechanism
City-gate prices are based on a reference price of
imported LPG and fuel oil prices in Shanghai times a
factor of 0.9, and take into account a province specific
discount/premium based pipeline fees, economic
development and other factors
The government will adjust the price level once a year
at the beginning and then gradually increase the
frequency to once half a year or quarterly
Objectives
To loosen the grip of the ex-factory prices which failed
to factor in consuming demands
◆The prices of natural gas will be pegged to prices of
substitute energies that are formed through market
forces, price competitiveness remains to encourage the
usage of natural gas
Impact
◆Currently, our major gas sources for Guangdong and
Guangxi projects are the imported LNG and trucked
CNG/LNG, which costs are higher than the new city-gate
prices
Cost is expected to be lowered upon ramping up of
gas supply from West-East II and other pipelines in the
regions, thus, greater demand is expected
◆Cost pass-through process is expected to be
shortened as the auto pass-through pricing system is
encouraged by the NDRC
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