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China considers shorter gap between gas price adjustments

[BEIJING] China is considering shortening the time between adjusting natural gas pricing to better reflect domestic market fundamentals, senior planning officials said, falling short of giving a clear signal if a much-anticipated price cut is near.

Price adjustments have been once a year under a scheme started July 2013. The government last adjusted prices on April 1, effectively merging a two-tier pricing into one to track an oil market slump.

China is world's No.3 gas consumer, but consumption has been hit be a cooling economy and an inflexible pricing system.

Under Beijing's pricing policy Chinese industrial users are paying among the world's highest prices, threatening the country's targets of curbing pollution and emissions by using more of the fuel.

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Industry players have over the past few months been speculating an up to 30-per cent cut in wholesale, or city-gate gas prices for non-residential users, may be introduced to help boost sagging demand.

The last price cut in April did not fully reflect falls in substitution fuels to which the regulated gas prices were benchmarked, curbing gas use by factories and slowing vehicles'shift to the fuel from diesel and gasoline.

"Next we are studying if to shorten the periods," said Hu Zucai, vice chairman of the National Development and Reform Commission (NDRC), the country's super ministry and economic planner. "It has been a huge achievement so far can't really expect us to run after we just learned to walk," said Mr Hu, at the sidelines of a presser on price reform.

The government is also expanding a tier-pricing reform to residential users of natural gas, to eventually lower the subsidies and prevent wasteful use, officials said.

The residential sector, which makes up one fifth of China's gas market and has been a key demand driver over the past decade, has seen gas consumption up five-fold between 2004 and 2013. Demand growth so far this year was less than 3 per cent.

Under the current pricing, Beijing sets the ceiling for wholesale gas prices and also encourages bulk consumers to negotiate prices direct with suppliers such as PetroChina.