Tax breaks for imports of gas

BEIJING - China will grant tax rebates for its rapidly growing imports of natural gas. The move, which has been long awaited by State energy companies anxious to pare losses from gas imports, is part of the country's strategy to boost use of the cleaner fuel.

The rebates will apply when import costs are higher than domestic wholesale prices. They will cover the period from 2011 through 2020, as well as prior imports from central Asian countries, the Ministry of Finance (MOF) said in a statement posted on its website.

While the tax reduction will help trim the losses of State energy companies such as PetroChina Co Ltd, which is piping in an increasing amount of central Asian gas, it is not enough to trigger more long-term imports of liquefied natural gas (LNG).

"There is not a significant amount of additional long-term LNG demand till around 2017. So you are only getting around three years of VAT reduction," said Beijing-based Gavin Thompson of the energy consultancy Wood Mackenzie Ltd.

"It's more about trimming losses on very high-cost gas and it's a part of a broader strategy toward bringing import prices closer to market prices in China."

China's gas demand is projected to triple in the coming decade to about 300 billion cubic meters and imports are likely to make up nearly one-third of that, analysts have said. Imports currently account for roughly 20 percent of consumption.

In July, China imported a record 1.18 million tonnes of LNG after it started a new receiving terminal in Jiangsu province in May.

The rebates apply to State-mandated import projects including the central-Asia pipeline venture operated by PetroChina, and LNG import terminals currently in use and those to be later approved by the State, the ministry said.

The MOF announcement will buy some time for Beijing's energy policy-setters to push for the next and more sensitive step - raising domestic natural gas prices - and later, long-touted energy pricing reform.

Reuters

(China Daily 08/23/2011 page13)