Oil and gas producers call for higher price
By Wang Ying (China Daily)
Updated: 2005-11-29 07:04
China's top oil and gas producers PetroChina and Sinopec yesterday said
government-controlled prices for natural gas discouraged them from investing in
gasfields, because they fear they will not make a profit.
They say the government should raise gas prices to avoid this situation.
PetroChina plans to more than double its current gas production to 45 billion
cubic metres by 2010, some 70 per cent of the country's total gas output,
PetroChina sources said.
If prices remain much lower than world levels, then the pressure to reach
that target will be greater than if prices were high, as the firm will not be as
interested in investing and therefore more easily increasing output, according
to Tang Yali, vice-president of the Natural Gas & Pipeline Company under
PetroChina. He spoke to China Daily on the sidelines of the China Gas Summit
2005 in Beijing.
"We now make little profit in the natural gas sector as a result of
government-regulated low prices, far behind world levels," said Tang.
Wang Gongli, president of PetroChina's Planning and Engineering Institute,
told the summit that the wholesale gas price in the United States was around 5.5
US cents per cubic feet last year, while in China it was less than 0.028 yuan
(0.35 US cents) per cubic feet.
"Like gasoline and diesel, we now use higher profits in the upstream crude
oil business to offset squeezed profit margins in the natural gas sector," Tang
"We have been talking with government bodies including the National
Development and Reform Commission to increase gas prices and better streamline
the energy pricing system," he said.
Domestic rival Sinopec yesterday made a similar complaint about the rigid
price-setting mechanism, which does not fit in with a true market economy.
The Beijing-based oil refiner has planned to almost double its annual gas
production to around 12 billion cubic metres.
Liu Enxue, general manager of the Sinopec natural gas company, said that if
the government increases prices, there will be even more growth in projected gas
output as the firm will be more willing to invest in developing gasfields.
Liu said Sinopec could invest 2 million yuan (US$247,000) in a gas well in
the Ordus Basin of Northwest China, where the natural gas price is 0.83 yuan
(10.2 US cents) per cubic metre.
That field can currently produce 290 million cubic metres of natural gas.
"We make a small profit from the current price at this gasfield," said Liu.
But he said that if the price was increased by 0.1 yuan (1.2 US cents) per
cubic metre, the Beijing-based refiner would further increase investment in the
field, which has a reserve of some 100 billion cubic metres.
Niu Li, a senior economist with the State Information Centre, told China
Daily the government should work out a pricing system to link all related energy
prices including those of coal, oil, gas and electricity, in order to streamline
the upstream and downstream sectors and better reflect market supply and demand.
Feng Fei, a department director with the State Council Development and
Research Centre, said natural gas prices should not be too high, as lower prices
help to boost the consumption of cleaner energy sources.
(China Daily 11/29/2005 page9)