With natural gas supplies still remaining pretty tight in Wuhan, Chongqing, and other Chinese cities, a source from China National Petroleum Corporation (CNPC) told The Beijing News that the company's major natural gas mines are all overloaded with production.

CNPC is putting forth the effort to meet the natural gas demands in the country, the source said. A rumor is now circulating that CNPC has been pushing the authorities to give the green light to a price hike, but the source said the company had never taken such a desperate step. The relatively small margin of profit will not prevent CNPC from increasing production. The source also revealed that the company has increased its natural gas production from 169 million m³/day at the beginning of November to 189 million m³/day now.

"Now, the root cause of the supply shortage is the lack of natural gas resources," the informant said. Although CNPC has increased its production, the supply still cannot meet the demand. As the weather gets colder, demand is expected to soar. Beijing currently uses 5.3 times the amount of natural gas that it used during the summer, the source added.

As the biggest natural gas provider in China, CNPC produces 80 percent of the natural gas in China. Its natural gas business has been growing fast. In the third quarter of this year, it produced 43.2 billion m³ of natural gas, an increase of 11.3 percent from the previous quarter. However, its net profit dropped 14.1 percent.

The source mentioned that the company had put more emphasis on natural gas exploitation and utilization as part of a strategic move to boost profit.

Some experts believe that the price of natural gas is too low. Yang Jianhong from China Petroleum Planning and Engineering Institute said there is a large gap between the value of natural gas and its price. There is an urgent need for a regulated pricing system, so as to ensure prices act as leverage in the market, Yang said.

Professor Lin Boqiang from Xiamen University's China Center for Energy Economics Research said that price control on the part of government does not only affect the profit growth of natural gas providers, but also encourages the massive use of this clean energy. It is estimated that the natural gas supply shortage in China will amount to 20 billion m³ in 2010, and climb to 90 billion m³ in 2020.

Han Xiaoping from China5e.com, an information Web site about energy, said China needs to diversify players in its natural gas market. With CNPC taking 80 percent of the market share, there is hardly any competition in the market. The government should consider granting market access to other qualified natural gas providers and allow them to grow. This way, a fair price can be achieved between providers and customers, Han said.

Han also believes the natural gas supply will be more stable when more competitors enter the market.