The dilemma of China's natural gas price mechanism

Imported gas is divided into imported pipeline gas and imported LNG. Imported LNG is divided into imported LNG long and LNG spot.

Among them, the vast majority of the "long-term agreement" signed by the import pipeline gas and imported LNG long-term association, that is, the buyer and seller sign a supply and demand agreement for about 20 years according to the principle of "pay or not". Such an agreement uses a price formula linked to international oil prices, i.e., gas price = slope x oil price + constant.

The trading price mechanism of imported LNG spot mainly refers to the world's three major natural gas benchmark prices and goes with the market.

Although the "Central Pricing Catalog" shows that the upstream gate station price is relatively liberalized, and the LNG price is formed by the market, this is not the case in actual operation.

A senior energy expert told interface news that a large part of the LNG spot imported by oil companies enters the long-distance pipeline network, which is still subject to the basic gate price + up to 20% and unlimited floating.

According to the provincial (autonomous region and city) benchmark gate station price table released in March 2019, the domestic benchmark gate station price is the highest in Guangdong and Shanghai, both of which are 2.04 yuan/cubic meter. If the price rises 20%, the gate station price is 2.45 yuan.

That is well below current spot CIF prices for imported LNG. Data from the Shanghai Petroleum and Natural Gas Trading Center show that on December 15, the CIF price of imported spot LNG in China was 38.66 US dollars per million BTU, or about 8.1 yuan per cubic meter.

"Although after several rounds of price mechanism reform, the sale price of most natural gas is no longer subject to the prescribed gate price control, but oil companies will still be summoned by the relevant authorities if the sale price is too much higher than the gate price." The senior energy experts said that only a small part of the imported LNG spot through the tank truck nearby sales, or as a contract gas sales to the city fuel company, in accordance with the "high into high" principle of sales.

"When the international oil price is below $60 per barrel, upstream companies generally import gas at a profit; When oil prices go above 60 dollars, we lose money on imported gas. The senior energy expert said.

The upstream "two barrels of oil" can not fully realize the price, the downstream city burning enterprises are also the same.

Urban gas prices are divided into non-resident gas prices and residential gas prices, which are regulated by local governments.

According to the relevant documents of the National Development and Reform Commission, non-resident gas use is based on the benchmark gate station price, and the specific gate station price is determined through negotiation within the unlimited range of 20% upward float and downward float; For residential gas use, the supply and demand parties may, on the basis of the benchmark gate price, negotiate to determine the specific gate price within the unlimited range of 20% upward or downward, and realize the connection with the non-residential gas price mechanism.

In practice, it is difficult for non-residents and residents to really link up, and the price adjustment range of the former is often higher than that of the latter, forming cross-subsidies.

According to China Energy News, a number of gas companies in Hengshui, Hebei province, said the incremental gas prices from June to August have reached 3.5 yuan per square meter, 4 yuan per square meter and 4.5 yuan per square meter. According to the forecast of the upstream gas source, the incremental gas price in the peak month of the heating season this year will exceed 5 yuan/square, and the LNG price will exceed 6 yuan/square. The comprehensive gas purchase cost of each city fuel company is estimated to far exceed the resident sales price, and the loss is serious.

Interface news reporters checked the price of pipeline natural gas for Hengshui residents in Hebei province and found that at the end of October, the city's first step sales price was raised from 2.66 yuan/cubic meter to 2.78 yuan/cubic meter, an increase of 0.12 yuan/cubic meter.

More than 30 cities have raised the price of natural gas for residential use from January to early November this year, China Economic Weekly reported. However, the increase is not large, at about 0.1 yuan/cubic meter.

Yang Changxin, general manager of Shenzhen Boyi Consulting Co., LTD., told the interface news that although the gas source of each city fuel enterprise is not the same, the terminal sales structure is not the same, but during the winter guarantee period, the gas price will be inverted, of which the civil gas price is the most inverted.

In his view, the resident gas price increase of about 0.1 yuan in the above cities is better than nothing for the rescue of urban burning enterprises, but it has symbolic significance. "This shows that the government has taken note of the price adjustment issue. This is of great significance for strengthening the price linkage between residents and non-residents, and promoting the healthy development of the industry."