China provinces hit by severe gas shortage - report

Tue Nov 17, 2009 12:13am EST

BEIJING, Nov 17 (Reuters) - Central and eastern Chinese provinces faced the worst natural gas shortage in years as supplies were diverted to snowstorm-hit northern China, while producers lacked incentives to expand output because of poor margins, a state broadcaster said on Tuesday.

Gas supplies for taxis in Wuhan, capital of the central province of Hubei, were halted from Monday while 11 industrial companies in Hanzhou, capital of eastern Zhejiang province, were shut as a result of gas shortages, China National Radio said.

The gas shortage in Wuhan reached 600,000 cubic metres per day and pressure in the gas pipeline was at only half the usual level, it said.

Wuhan's government was providing a 100-yuan-per-day subsidy for taxis as drivers switched to more expensive petroleum, the report said.

It said the gas shortage in Hanzhou was expected to worsen as the city lies near the end of the west-east gas pipeline that pumps the fuel from remote northwestern China to energy-thirsty regions in the east.

The supply deficit in Nanjing, capital of eastern Jiangsu province, had reached 400,000 cubic metres per day, 40 percent of its planned consumption volume, according to C1 Energy, an industry information provider.

Emergency measures to curb consumption had also been taken in other cities including Chongqing, Rizhao, Xi'an, Yichang and Yangzhou, but demand was set to rise further because of expected colder weather, C1 Energy said.

Unseasonably early and heavy snow in northern China had caused 38 deaths as of last Friday and a surge in energy demand.

The power load on the Northern China electricity grid surged to a high of 127.5 gigawatts this month, 26 percent higher than a year earlier. On the Beijing-Tianjin-Tangshan grid networks, the load increased 24.7 percent from a year earlier late last week.

China, which keeps rigid controls on gas prices, is expected to raise natural gas prices under a new pricing regime due to be in place in January. The move follows its last review in 2005, when Beijing linked the price of the fuel with coal and crude oil.

The radio report attributed the reason for gas shortage to the failure of the pricing mechanism, citing an unnamed official with CNPC, China's largest gas producer. (Reporting by Jim Bai and Chen Aizhu; Editing by Chris Lewis)