The city gas price is the sum of the applicable ex-plant price and the pipeline transportation fees. It moves according to any change to the relevant ex-plant price and pipeline transportation fee and is subject to strict government control. There are separate city gate gas prices for natural gas to be used by domestic, industrial and commercial consumers.
Last December, the Chinese government introduced a natural gas price reform pilot scheme. The trial regions for the pilot scheme are Guangdong province and Guangxi Autonomous Region. The two regions now follow a new system of determining the city gate prices, where the city gate price is indexed to a base gas price published in Shanghai, which known as the ‘hub price’: the suppliers and the customers (whether domestic, industrial or commercial) can negotiate a price acceptable for both. In other words, the city gate price under the pilot scheme is no longer linked to the gas usage or a specific ex-plant price and it will be a market-oriented price.
For details as to how the hub price is determined, please refer to our briefing on ‘Has China Finally Picked up the Pace on Its Natural Gas Reform?’.