With the implementation of fuel tax reform from January 1, natural gas price mechanism reform is next on the government's agenda.

Sources from China National Petroleum Group told Shanghai Securities News that reform proposals have already been submitted to the relevant ministries. It is predicted that natural gas prices of the three main petroleum groups should converge in the future.

In an interview with Shanghai Securities News, Lin Boqiang, director of Energy Economy Research Center of Xiamen University said, "At present, China's natural gas price is lower than the actual value and than other similar energy sources. Natural gas price mechanism reform is likely to be implemented in 2009 and may take fuel tax reform model as a reference.

At present, in some big cities in central and eastern regions, the price of liquefied petroleum gas (LPG) is from 3 yuan to 4 yuan per liter, 4.1 yuan to 5.6 yuan per stere if compared with the natural gas price. However, the actual natural gas price in these cities is from 2.1 yuan to 2.4 yuan per stere, equivalent to about half of LPG price, which results in a spiraling increase in the demand for natural gas. On the other hand, supplies are steadily falling because of low profits or even losses in this field. Tension in the relationship between demand and supply of natural gas is growing.

Insiders are calling for the implementation of a pricing mechanism as soon as possible, to allow a genuine relationship to form between demand and supply.

For more information, please read the entire article in Chinese:

http://paper.cnstock.com/html/2009-01/12/content_66844211.htm

(China.org.cn translated by Ma Yujia January 12, 2009)