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01-07-2011, 08:30 AM
(This post was last modified: 23-10-2013, 02:55 PM by CityFarmer.)
PetroChina opens new link for Turkmen gas, awaits price hike
BEIJING, June 30 (Reuters) - China's top energy giant PetroChina on Thursday opened a gas pipeline linking central Asia with southern Guangzhou that will cause the company more losses unless Beijing lifts the selling price of the costly Turkmenistan fuel.
PetroChina has long lobbied the government to raise domestic selling prices for central Asian gas, which is priced at the Chinese border at nearly double the rate the firm is allowed to sell to domestic users.
With the start-up on Thursday of the 4,865-kilometre trunk line from northwest Xinjiang to the southern export hub of Guangdong, gas sales from Turkmenistan are expected to nearly quadruple this year to 17 billion cubic metres, state media said, roughly 17 percent of China's total domestic consumption last year.
Petrochina was eagerly awaiting a price hike that industry experts said could be imminent, as China's consumer price index, a main factor holding back an increase, could peak in June after hitting a 34-month high in May.
"PetroChina is extremely eager to see the price increase. It's just not sustainable for its growth as it already faces tight cash flows after massive spending on many investments," said Yan Kefeng of Cambridge Energy Research Associates (CERA).
"Without a price rise, it may become an disincentive for the firm to deliver the fuel."
PetroChina piped in a total of 3.665 million tonnes, or roughly 5.1 billion cubic metres, of Turkmen gas in the first five months, official customs data has shown , five times the year-earlier rate and surpassing the whole of last year.
The new trunk line is part of a 142 billion yuan ($21.8 billion) project that pumps the clean burning fuel from central Asia to 15 Chinese provinces and cities and is expected to reach a capacity of 30 bcm by June 2012, the company has said.
A PetroChina official told an industry seminar on Wednesday that the seasonal demand dip for natural gas in summer would also offer a window for a price hike. Demand for natural gas normally peaks in winter for heating purposes.
Turkmen gas costs nearly double domestic price levels, even after Beijing raised its benchmark well-head gas prices nationwide by 25 percent in June 2010, resulting in deep losses for PetroChina since it started pumping in the central Asian fuel in late 2009.
Chinese media reported PetroChina's chief financial officer Zhou Mingchun saying in March that the company recorded a loss of 3.7 billion yuan in marketing 4.3 bcm of imported gas last year, which indicated the firm was making a loss of nearly $130 for each thousand cubic metres of gas sales.
While Beijing may raise prices for Turkmen gas, the government may still hold back from hiking nationwide well-head, or ex-gasfield, prices for the fuel, as that will have a broader price impact, CERA's Yan said.
China in June 2010 raised gas prices by 0.23 yuan per cubic metre to roughly $4.46 per million British thermal units (mmBTU), a level largely on par with the U.S. Henry Hub NGc1 spot prices.
That price compares to $8.48 per mmBTU for imported liquefied natural gas and $8.12 per mmBTU for the Turkmen gas for May as recorded by Chinese customs. (Reporting by Chen Aizhu; Editing by Jonathan Hopfner and Michael Urquhart)
BEIJING, June 30 (Reuters) - China's top energy giant PetroChina on Thursday opened a gas pipeline linking central Asia with southern Guangzhou that will cause the company more losses unless Beijing lifts the selling price of the costly Turkmenistan fuel.
PetroChina has long lobbied the government to raise domestic selling prices for central Asian gas, which is priced at the Chinese border at nearly double the rate the firm is allowed to sell to domestic users.
With the start-up on Thursday of the 4,865-kilometre trunk line from northwest Xinjiang to the southern export hub of Guangdong, gas sales from Turkmenistan are expected to nearly quadruple this year to 17 billion cubic metres, state media said, roughly 17 percent of China's total domestic consumption last year.
Petrochina was eagerly awaiting a price hike that industry experts said could be imminent, as China's consumer price index, a main factor holding back an increase, could peak in June after hitting a 34-month high in May.
"PetroChina is extremely eager to see the price increase. It's just not sustainable for its growth as it already faces tight cash flows after massive spending on many investments," said Yan Kefeng of Cambridge Energy Research Associates (CERA).
"Without a price rise, it may become an disincentive for the firm to deliver the fuel."
PetroChina piped in a total of 3.665 million tonnes, or roughly 5.1 billion cubic metres, of Turkmen gas in the first five months, official customs data has shown , five times the year-earlier rate and surpassing the whole of last year.
The new trunk line is part of a 142 billion yuan ($21.8 billion) project that pumps the clean burning fuel from central Asia to 15 Chinese provinces and cities and is expected to reach a capacity of 30 bcm by June 2012, the company has said.
A PetroChina official told an industry seminar on Wednesday that the seasonal demand dip for natural gas in summer would also offer a window for a price hike. Demand for natural gas normally peaks in winter for heating purposes.
Turkmen gas costs nearly double domestic price levels, even after Beijing raised its benchmark well-head gas prices nationwide by 25 percent in June 2010, resulting in deep losses for PetroChina since it started pumping in the central Asian fuel in late 2009.
Chinese media reported PetroChina's chief financial officer Zhou Mingchun saying in March that the company recorded a loss of 3.7 billion yuan in marketing 4.3 bcm of imported gas last year, which indicated the firm was making a loss of nearly $130 for each thousand cubic metres of gas sales.
While Beijing may raise prices for Turkmen gas, the government may still hold back from hiking nationwide well-head, or ex-gasfield, prices for the fuel, as that will have a broader price impact, CERA's Yan said.
China in June 2010 raised gas prices by 0.23 yuan per cubic metre to roughly $4.46 per million British thermal units (mmBTU), a level largely on par with the U.S. Henry Hub NGc1 spot prices.
That price compares to $8.48 per mmBTU for imported liquefied natural gas and $8.12 per mmBTU for the Turkmen gas for May as recorded by Chinese customs. (Reporting by Chen Aizhu; Editing by Jonathan Hopfner and Michael Urquhart)
