China Gas Holdings Ltd. (00384.HK) expects a fall in the selling prices of natural gas for non-residential use after the National Development and Reform Commission (NDRC) linked its pricing mechanism to world oil prices, the Hong Kong Economic Journal reported Wednesday.
The company said the move will ultimately boost overall demand and lead to cheaper natural gas amid falling crude costs.
Wholesale prices of non-residential gas under a certain quota will increase by four fen (0.6 US cents) per cubic meter staring April 1, the NDRC said Saturday on its website.
However, the wholesale price of non-residential gas outside the quota will be cut by 44 fen per cubic meter.
The changes, which will eliminate the gap between the two price tiers, will lead to an average reduction of 15 fen per cubic meter in overall wholesale prices of non-residential gas.
Prices for residential users are unchanged, the NDRC said.
The announcement came earlier than expected, surprising the market which had expected China to resist any price cuts in order to protect state-owned giants such as PetroChina Co. Ltd. (00857.HK), Frank Li, China Gas general manager for investor relations, told a Hong Kong media luncheon on Tuesday.
China’s natural gas market has been hindered by the high cost and disadvantages of switching from oil.
CLSA has lowered its estimates for the country’s urban gas demand by 2-5 percent for the next few years.
Translation by Vey Wong
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