OREANDA-NEWS. December 12, 2013. China has hiked the price of imported natural gas by more than a quarter backdated to July 1 as it tries to encourage more deliveries by pipeline and ship to cover a winter shortage of the fuel, industry experts said.

The world's top energy user has been in a severe gas shortage since early November that has forced rationing and the suspension of supply to some industries as it tries to guarantee sufficient stock for home and transport use.

"This is a small step in domestic gas pricing reform toward ensuring adequate supplies of gas in what could be a colder-than-expected winter," said Gordon Kwan, head of oil and gas at Nomura Research.

Beijing is also expected soon to introduce other reforms in pricing the cleaner-burning fuel to boost imports and encourage the development of China's shale gas resources.

The average sales price for imported pipeline gas will be set at 1.11 yuan (USD0.18) per cubic metre effective July 1, according to a statement seen on the Ministry of Finance website.

The ministry did not provide a comparison, but based on a previous rate of 0.88 yuan per cubic metre set in July 2010, this would mark a 26-percent increase.

"It (the price increase) will help big gas importers like PetroChina mitigate their losses from selling Central Asia gas and LNG at below cost," Kwan said.

For imports of liquefied natural gas (LNG), or super-chilled gas shipped in tankers, domestic sales prices would be 31.45 yuan per gigajoule, according to the MOF, which industry experts converted to around 1.20 yuan per cubic metres.

The price adjustment is an apparent follow-up to Beijing's move in June to raise gas prices for wholesale distributors selling to non-residential users by 15 percent , the first hike on a national scale in three years.

Top oil and gas producer PetroChina said in August it expected the first price hike to narrow its losses from selling imported gas below cost and boost its profitability by 20 billion every year from 2014.

PetroChina recorded a loss of 42 billion yuan last year for selling imported gas at artificially low prices as mandated by the government to tame inflation.

PetroChina imports LNG and also operates the country's cross-country gas pipelines from Central Asia and Myanmar.

The price increase would also boost government revenues by reducing tax rebates that the main importers -- such as CNOOC, parent of CNOOC Ltd, Sinopec Corp and PetroChina -- get based on the difference between import costs and domestic sales prices.

China, the world's fourth-largest gas user, is encouraging greater use of the lower-carbon fuel, with consumption set to triple by 2020.

In the first ten months of this year, implied gas demand expanded 12.5 percent to 133.6 billion cubic metres, data from the National Development and Reform Commission showed.

Imports made up 32 percent of the consumption.