The Chinese National Development and Reform Commission (NDRC) will set up a new regulation mechanism regarding the wholesale natural gas pricing mechanism for domestic residential customers, adopting the pricing methodology already in use for non-residential customers. Once adopted in June 2018, it will enable prices to rise by no more than 20% from a certain benchmark price and decrease to whatever level agreed between suppliers and purchasers. The NDRC expects this pricing mechanism to be more flexible than the existing system, which currently sets a ceiling of CNY1.4/m3 (US$22c/m3) for residential gas stations (price unchanged since 2010).
Chinese retail gas prices are determined by local authorities, while residential gas stations prices are set by the Chinese State, which also determines how much gas suppliers (including importers and domestic producers) can make from gas sales. The current station prices are below the imported gas price and don't reflect the latest supply-demand dynamics. The NDRC is considering whether to change retail gas prices by the end of August 2018.