PetroChina offers big users flexible gas pricing to counter slower demand

By AIBING GUO
Bloomberg

PetroChina Co., the country’s biggest natural gas producer, is said to be offering large industrial users flexible prices and a promise of year-round supply as it seeks to boost sales amid slowing demand and ample supply.

The company has set up natural gas sales units in provinces including Henan and Jiangsu and cities such as Shanghai to reach out to manufacturers and power generators, said people with knowledge of the efforts, asking not to be identified because the information isn’t public.

An economy growing at the slowest pace in 25 years is curtailing demand and compelling PetroChina to aggressively market its gas, the latest struggle among global energy companies as prices and consumption weaken.

“China is facing a gas glut as supply exceeds demand,” Bloomberg Intelligence analysts Wang Lu and Miranda Wang said in a research note. “Amid slower industrial output growth, the competitive edge of gas has been eroded by a slump in Brent crude and a slow adjustment in gas prices.”

PetroChina sells about 45% of its natural gas directly to large industrial customers and the rest through utilities to other industrial and residential users, according to Shi Yan, an analyst at UOB-Kay Hian in Shanghai.

The company is offering large users, such as power plants and fertilizer makers, guaranteed year-round direct supply to counter concerns that increased residential demand for heating in the winter will interrupt deliveries, according to the people. PetroChina is also open to negotiating flexible prices for supply in the summer, when demand is lower, the people said.

Sinopec Push

China Petroleum and Chemical Corp., or Sinopec, is also promoting gas sales to customers such as power plants, an official at the company said, also asking not to be identified, citing internal policy.

Beijing-based spokesmen for PetroChina and Sinopec didn’t answer calls seeking comment.

China’s natural gas production, including coal-bed methane and shale gas, increased 4.3% to 67.4 billion cubic meters in the first half of 2015 from the same period a year earlier. Consumption increased at a slower pace of 1.4% to 91.5 billion cubic meters, according to the National Energy Administration.

Imports of natural gas via pipeline are up nearly 15% in the first half of the year to 12.3 million metric tons, while inbound shipments of liquefied natural gas (LNG) fell about 4% to 9.5 million tons, according to customs data.

PetroChina had global natural gas output of 85.8 billion cubic meters and Sinopec produced 20.3 billion cubic meters in 2014, according to their annual reports.

• Most Read
• Most Commented