China and Russia have reached an agreement on the price of natural gas imported from Russia. The price of natural gas is expected to be linked with oil prices, according to Zhang Guobao, director of the National Energy Administration (NEA) in Beijing on Thursday.

Zhang Guobao

Mr. Zhang, also vice minister of the National Development and Reform Commission and member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), made the remarks in an interview with Beijing News during the CPPCC’s annual session.

 

The whole country suffered from a natural gas shortage last winter. Zhang pledged that the government will make every effort to ensure the supply of natural gas is sufficient in the coming winters. A main policy is to increase supply. Gas will be supplied to Jiangsu Province and Wuhan City, Hubei Province through the west-east natural gas transmission pipeline, which had previously only be used for Shanghai, to alleviate the natural gas shortage in east China.

Zhang believes the change of oil price has been much affected by various financial factors, so it is not a simple reflection of supply-demand relationship. He said, “In the past, it was a big change if the oil price had a fluctuation of a few dozen cents; but now it has become common to see the fluctuation of US$2. The oil price is so variable, just like the stock price. However, the present oil price is stable at around US$80 a barrel, which is more rational than US$147 before the financial crisis of 2008.”

In terms of how to prevent oil price fluctuation, Zhang said, “Because over half of the oil consumption depends on imports, the oil price in China has to conform to the price of the international market, though the Chinese government may occasionally take some intervention measures.”