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    China Business
     Jun 10, '14

CNPC faces pain on Russia gas deal
By Radio Free Asia

China's massive natural gas deal with Russia could drive the government to speed pricing reforms, spurring a significant rise in household rates.

Nearly three weeks after the two sides signed the US$400-billion (2.5-trillion yuan) export deal in Shanghai, the terms remain a commercial secret, but most analysts have cited a starting price of US$350 (2,186 yuan) per thousand cubic meters.

The Russian export price, which is subject to periodic increases under a formula tied to oil and oil products, would be higher than the cost of gas from Central Asia but lower than Russia's prices

for Europe or China's imports of liquefied natural gas (LNG).

First supplies from Russia's state-owned Gazprom under the 30-year contract are not expected before 2019, but the starting price suggests that rate increases will be needed to avoid losses for China National Petroleum Corp. (CNPC).

Current charges in Beijing stand at 2.28 yuan (US$3.64) per cubic meter for households and 3.23 yuan (US$5.16) per cubic meter for industrial and commercial use, the official Xinhua news agency reported.

The rates suggest that CNPC would face growing losses on residential service after pipeline costs, distribution, and delivery are taken into account. More...

Reprinted with the permission of Radio Free Asia. For original article, see here

Copyright (c) 2014, Radio Free Asia.




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