China’s Regulator Lowers Domestic Natural Gas Prices Amid Coronavirus Outbreak

SEATTLE (Oil Monster): China's state planner National Development and Reform Commission, or NDRC, will reduce domestic natural gas prices to help companies restart operations as it attempts to balance the impact of the coronavirus outbreak and the country's economic development, it said in a statement dated February 22.

The measures, like recent tax breaks and monetary stimulus, are being implemented in the backdrop of concerns that economic activity could be heavily impacted due to the epidemic.

The NDRC said it will bring forward the date when government-regulated natural gas prices switch from peak season to off-peak levels, from the usual implementation date of April 1.

As of February 22, the city gate gas price will be lowered for non-residential sectors that follow the government-guided pricing mechanism, and for gas suppliers that follow market-based pricing, companies were encouraged to negotiate prices with downstream gas consumers in accordance with market conditions.

"This aims to reduce the price as much as possible," the NDRC added. The notice was addressed to all Chinese provinces, autonomous regions, municipalities, and the national oil companies China National Petroleum Corp or CNPC, China Petroleum and Chemical Corp or Sinopec, and China National Offshore Oil Corp or CNOOC.

During the peak season, CNPC's listed subsidiary PetroChina can hike the city gate price by as much as the upper limit of 20%, and last year it was able to push through a hike of over 15%, Neil Beveridge, senior oil analyst at Bernstein Research said. He said the off-peak season price hike last year was around 6.4%.

"The exact off-season gas price at the city gate for 2020 is not yet clear; however, we expect an approximate 15% decline in average city gate price as a result of the policy," he added.

NDRC said it will offer more favorable price cuts for sectors that have been paralyzed by the coronavirus outbreak, such as chemical fertilizer production. Local authorities should lower prices for non-residential use according to price reductions in the upstream sector, and pass on the lower rates effectively to end-users, it said.

Additionally, the regulator stressed on maintaining the stability of the natural gas market, including gas production, supply and demand connections, downstream consumption, and to "keep the market running smoothly."

Courtesy: www.spglobal.com