Non-residential Natural Gas Gate Price to Rise in Zhejiang

According to Zhejiang Price Bureau, the provincial subordinate of NDRC, Zhejiang Natural Gas Development Co., Ltd. will raise the non-residential natural gas’ city gate price from RMB 2.09/cbm to RMB 2.19/cbm, up RMB 0.1/mt, from May 1, 2018. Zhejiang Province always took the lead in the past several years and reduced the piped gas price as a pioneer in China so as to stimulate the economic recovery, and the provincial gas company executed several rounds of unilateral price reduction. Actually in the past winter heating season, when NOCs and many provincial hubs raised their non-residential gas price, Zhejiang held the price unchanged. Therefore, the recent notice of the price rise confused many participants.

Actually, Zhejiang Natural Gas Development Company has suffered great profit losses since last September, and the losses even exceed 700 million CNY in Q1 and 1 billion CNY so far from last September. The company is the franchisee of the provincial gas operator, a joint venture between Zhejiang Energy Group, the operator with a 53% stake, CNOOC Gas Power Group with 37% and Zhejiang Zheneng Electric Power with 10%, and the resources include piped gas from West-to-East Trunk Line, Sichuan-to-East Trunk Line, East China Sea Gas Field, as well as regasified natural gas from LNG receiving terminals.

In order to help to maintain the dynamics of the real economy, the provincial government of Zhejiang exerted unprecedented efforts on the cost reducing and efficiency boosting, and the low natural gas price for industrial users plays an important role in the energy supply. However, because of the clean energy promotion and the revitalized economy, the natural gas consumption grew rapidly in Zhejiang Province. Particularly, it is estimated that the growth rate of the non-residential gas users will reach 50% in 2018. Meanwhile, the LNG has taken up over 60% of the gas supply of the province in last winter and over one third in last year, because of the adequate supply from CNOOC Zhoushan Terminal. Therefore, the buoyant LNG price in the past several months brought great pressure on the low-priced provincial gas supply, and the operator suffered billions of losses accordingly. Hence, the operator decides to implement stop-loss measures, especially when the industry is in the lull season, and the market supply is relatively adequate.