Prices of domestically produced LNG in China have soared to all-time highs as PetroChina remains in a stand-off with local governments and plant owners over the price of gas feedstock. Under a new pricing regime unveiled by the National Development and Reform Commission (NDRC) in late June, designed partly to cut losses on gas imports, the price of gas for domestic liquefaction plants is to be determined by buyers and sellers (WGI Jul.3'13). The Chinese state energy giant now wants to hoist rates to the new highest city-gate price band, which traders say would be about double the amount LNG producers paid before the price reforms. Local governments in northern China, home to most of the country's small liquefaction plants, are reluctant to pay that much, worried about the impact on the local economy and on the plants themselves, some of which might have to shut, traders say. But PetroChina seems intent on pushing through the increase, squeezing deliveries to plants that won't pay more, with the result that domestic LNG output has tumbled and prices have soared. The small liquefaction units have a capacity of around 8 billion cubic meters per year, or roughly 5.9 million tons per year of LNG, and a further 17 Bcm/yr is expected on line by the end of the year.
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