Natural Gas Asia

Tuesday, May 23, 2017

Sino Gas & Energy Holdings Welcomes China's Decision to Overhaul Industrial Gas Prices

Unconventional gas explorer Sino Gas & Energy Holdings has welcomed China’s move to overhaul gas price for industrial users.

National Development and Reform Commission (NDRC) announced its decision to harmonize existing and incremental natural gas prices for industrial users effective 1 April 2015.

Commenting on the NDRC announcement, Sino Gas’ Managing Director Glenn Corrie said, “We are very pleased with this announcement as it confirms our expectations of China maintaining robust gas prices in support of their policy to promote development of China’s domestic gas resources. We welcome the clarity this announcement provides and confirmation of our internally held view. We continue to believe we are fortunate to be ideally positioned to supply one of the world’s largest and fastest growing gas markets with low cost gas with supportive government policies.”

Key components of the announcement include:

- Harmonization of “Existing Gas” (i.e. based on 2012 volumes) and “Incremental Gas” prices, in-line with their stated goal of achieving harmonization by 2015 when tiered gas prices were first implemented in 2013

- An increase in the existing gas price of RMB 0.04/cubic meter (~$0.2/mcf)

- A decrease in the incremental gas price of RMB 0.44/cubic meter (~$2.0/mcf)

- Implementation of pilot scheme to allow direct negotiation between bulk users and upstream suppliers

- Shanxi province new harmonized city gate price is RMB 2.61/cubic meter (~$11.79/mcf)

“Given the current mix of gas currently being sold under existing and incremental, the new harmonized city gate prices are expected to be approximately flat to down less than 5% from the current blended prices based on a 10-30% share of incremental volumes above 2012 volumes,” Sino Gas said.

Sino Gas is operator of the Linxing and Sanjiaobei Production Sharing Contracts (PSCs) in the Ordos Basin, Shanxi province.

The PSCs cover an area of approximately 3,000km2 . The Ordos Basin is the second largest onshore oil and gas producing basin in China. The region has mature field developments with an established pipeline infrastructure to major markets

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