China will cut wholesale prices of natural gas from Friday, the country’s top economic planner said in the year’s second price reduction, aimed at boosting flagging growth in demand for the cleaner-burning fuel.
China’s energy giants have been forced to resell or renegotiate long-term global supplies as a cooling economy has hit gas demand in the world’s third-largest consumer, while an inflexible pricing policy also curbed consumption.
Benchmark city-gate prices for non-residential users will be lowered by 0.70 yuan ($0.1097) per cubic metre from November 20, the National Development & Reform Commission aid on Wednesday, in a statement on its website.
Besides cutting the benchmark prices, the agency also said it allowed a 20% upward float, although it set no limit for downward adjustment.
The agency also urged participants in the market for non-residential gas to trade on the Shanghai spot exchange in order to achieve “full market transparency” within two to three years
The Shanghai exchange will publish regular information on spot trades, it added.
Beijing introduced a new pricing scheme in July 2013 to pull domestic prices of natural gas closer to the cost of imports, besides spurring greater domestic output and burning cleaner fuel to cut emissions and fight pollution.
The government last adjusted prices on April 1, effectively merging two tiers of pricing into one, to track an oil market slump.
But that price cut did not fully reflect the falls in substitution fuels against which the regulated gas prices were benchmarked, curbing use by factories and slowing vehicles’ shift to the fuel from diesel and gasoline.
Demand growth shrank to less than 3 percent this year, a far cry from the heady years between 2004 and 2013, when gas use jumped five-fold.
The fall forced state oil majors to cut domestic onshore production and also delay developing new discoveries offshore China.
The economic planner’s announcement did not address residential gas, a sector long seen as sensitive to price increases.
It said last month it was considering shortening the gap between gas price adjustments, so as to better reflect market fundamentals.
