Natural gas distribution companies in Chinese cities are expected to increase prices for households, but the Chinese government is taking several measures to support companies by insisting that they pass on more of the costs of imported fuel to consumers.

In light of this, the National Development and Reform Commission – considered the country's largest economic planning body – stated that several discussions had been held over the past few months with local officials and major gas distribution companies. To request raising the ceiling on family prices, especially with the advent of next September.

Deregulation is likely to raise costs for residential gas consumers, and the amendments will also affect industrial consumers, who will benefit from the decision as the various tariffs imposed on households and businesses will be abandoned in favor of market-based pricing.

Distribution companies are forced to provide supplies to families at fixed prices through each city, while they pay for the majority of their fuel at market prices, which means the erosion of profits in light of the increased cost of imported liquefied natural gas in light of the Russian invasion of Ukraine.

The National Development and Reform Commission did not respond to a request for comment on the matter, and the Chinese government aims to relax the rules last year, which allows for more frequent updates of fixed prices for industrial consumers or homes, which worked to support last year’s profits for gas distribution companies, including E. NN Energy Holdings, Kunlun Energy and China Resources Gas.

Officials aim to speed up the reforms. Distribution companies will need to inform local authorities of the costs paid to purchase gas from local or foreign suppliers, in addition to their selling prices. Amendments to pricing rules will make it more attractive for companies to import LNG in additional quantities.

As for natural gas imports, they declined in 2023 compared to 2021 due to the reluctance of distribution companies to purchase immediate shipments, which are expensive in some cases. It is expected that supplies will be diverted by gas users for industrial purposes to ensure sufficient fuel for families during the winter months.