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PetroChina Rises in Shanghai on Gas Price Increase

June 1 (Bloomberg) -- PetroChina Co., the countrys biggest energy company, gained in Shanghai trading after the government raised wholesale natural gas prices by 25 percent, the first increase in more than two years.

The shares rose as much as 1.8 percent to 11.05 yuan and were at 10.92 yuan at 10:37 a.m. local time, up 0.6 percent. Changchun Gas Co. jumped as much as 9.6 percent, while Anhui Heli Co. gained up to 3.9 percent. The benchmark Shanghai Composite Index dropped 0.7 percent.

The National Development and Reform Commission raised benchmark prices to 1,155 yuan ($169) per thousand cubic meters, effective from today. The increase may spur gas imports and production, in line with Chinas goal of tripling the use of the cleaner-burning fuel to about 10 percent of energy consumption by 2020.

This leaves good scope for potential upgrades for PetroChina, clearly the biggest beneficiary, with 30 percent of its production and 50 percent of its reserves in natural gas, Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd., wrote in an e-mailed note to clients today.

The economic planner last raised prices of gas sold to industrial users including power plants by about 33 percent in November 2007 while exempting households and fertilizer producers from the increase. The NDRC said yesterday it will eventually dismantle the two-tier pricing system as part of reforms to encourage energy conservation across the economy.

Gas Production

PetroChina plans to rapidly increase natural gas production to help meet energy demand in the worlds fastest- growing major economy, Vice President Li Hualin said in an interview in on Oct. 14. Gas output may match that of crude by about 2015, Li said then.

After the price hike, were feeling more confident of PetroChina delivering 20 percent annual growth in gas production in the coming five years, Mirae Assets Kwan said.

Gas suppliers including PetroChina have asked the state to speed up pricing reforms as China starts receiving more piped gas from neighboring countries. Importers typically buy at higher international rates and sell at lower regulated prices.

Chinese gas imports may rise to 15 billion cubic meters this year from 7.8 billion cubic meters in 2009, the NDRC said.

--Wang Ying. Editors: Ryan Woo.