PETROCHINA is bucking normal practice and raising its wholesale natural gas prices during the weak-demand spring season, sources said, preparing for the coming consolidation of China’s pipeline assets and trying to recoup huge fuel import losses.

The increases from PetroChina, which supplies more than 70 percent of China’s gas, come as spring brings warmer temperatures, when demand and prices typically fall.

PetroChina is also under pressure to recoup continuing losses from its gas import business due to high input costs versus government-capped domestic prices, sources said.

PetroChina lost 3.3 billion yuan (US$480 million) on its gas imports in the first quarter of this year due to high fuel costs. Over 2018, the firm incurred a net loss on its gas imports of nearly 25 billion yuan.

“Anticipating the launch of the national pipeline group in the third quarter that will take away a business with massive guaranteed revenues, the company wants to bide the time paring losses in the gas import business,” said a gas official with a State oil giant.

PetroChina’s gas import business has suffered losses for years because its import costs, especially supplies of liquefied natural gas (LNG) under long-term contracts, often exceed government-capped domestic prices.

PetroChina also wants to compensate for expected revenue erosion from a spin-off of some of its assets once a national pipeline group is formed as part of a reform of the oil and gas sector, three company sources and two analysts said.

PetroChina needs the extra income to make “investments in the downstream gas distribution sector as it prepares to spin off pipeline assets,” said Wang Haohao, gas analyst with consultancy Zibo Longzhong.

The government plans to launch this year a national oil and gas pipeline company that will combine assets from PetroChina, CNOOC and Sinopec, a move aimed at spurring private and foreign exploration investment.

The price increases sought would apply to wholesale rates that PetroChina charges provincial piped-gas distributors, power plants and big industrial users such as fertilizer producers.

PetroChina expects to agree with buyers to prices about 6.4 percent above government-set city-gate prices for gas from conventional domestic fields and imports by pipeline from Central Asia, which together make up more than 60 percent of PetroChina’s total gas supplies, said the sources.(SD-Agencies)