Singapore (Platts)--3Dec2012/446 am EST/946 GMT

China will consider linking gas prices across the value chain as well as the establishment of a national natural gas trading market during the current 12th Five Year Plan period to 2015, according to an official development plan for natural gas released Monday by the National Development and Reform Commission.

The NDRC, the country's top economic planning agency, said earlier that the natural gas development plan had been approved by the State Council in October.

According to the plan, the government is pushing ahead with natural gas pricing reforms and it intends to study the linking of prices across the upstream, midstream and downstream gas segments. It will consider introducing differentials in gas prices to reflect seasonal demand, as well as look into establishing a national natural gas trading market.

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A pilot gas pricing mechanism, which links gas prices to alternative fuels LPG and fuel oil, was introduced in southern Guangdong and Guangxi provinces in December last year.

The government aims to deregulate gas prices to narrow the gap between domestic supplies and the cost of imported LNG and pipeline gas from Central Asia, as well as to encourage domestic development and production.

China's total gas imports will be 93.6 billion cubic meters by 2015, bringing the country's import dependence for gas to over 35%, from 15% in 2010, according to the plan. Natural gas currently accounts for 4.6% of the overall energy mix in China.

Growth in natural gas consumption is expected to average 20 billion cu m/year over 2011-2015, hitting 230 billion cu m by 2015. Meanwhile, total supply capacity is expected to reach about 176 billion cu m by 2015, including 138.5 billion cu m of conventional gas production, 16 billion cu m of coalbed methane and 15-18 billion cu m of synthetic gas from coal sources. Coalbed methane production will continue to come mainly from the Qinshui and Ordos basins across Inner Mongolia, and Ningxia and Shaanxi provinces. New areas in Xinjiang, Guizhou, Anhui, Henan, Sichuan and Gansu will also be developed.

The NDRC had earlier announced an official target to produce 6.5 billion cu m of shale gas by 2015. Shale development will be focused in Sichuan, Chong1ing, Guizhou, Hunan, Hubei and Yunnan provinces, the report said.

During the FYP period to 2015, China is expected to construct over 40,000 kilometers of gas pipelines with capacity of 150 billion cu m/year as well as 20 billion c m/year of gas storage capacity. These will link the main domestic producing regions in western and central China to the coastal regions in the east.

In the upstream segment, the government is targeting to add new proved reserves of 3.5 trillion cu m of gas, comprising 1.9 trillion cu m of technically recoverable resources. It also hopes to add 1,000 billion cu m of new coalbed methane reserves.

--Song Yen Ling, yen_ling_song@platts.com --Edited by Deepa Vijiyasingam, deepa_vijiyasingam@platts.com

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