China's Resources Tax in Xinjiang Province May Accelerate Gas Pricing Reform

Strategic Insights -

China's trial launch of a resources tax in Xinjiang province, a major gas-producing region, is expected to put pressure on the government to introduce natural gas pricing reform. The tax, which has a rate of 5% on ad valorem, may force PetroChina, the largest gas producer in Xinjiang, to pay an extra 3.6 billion yuan (US$527.094 million) per year. This added burden may prompt the National Development and Reform Commission (NDRC) to accelerate the introduction of gas pricing reform, given the narrower profit margins for oil firms.

Key Takeaways:

  • The resources tax in Xinjiang, with a rate of 5% on ad valorem, may require PetroChina to pay an extra 3.6 billion yuan (US$527.094 million) per year.
  • Sinopec, China's second-largest natural gas producer, will pay an additional 1.4 billion yuan in tax per year due to the new tax.
  • The tax paid by natural gas producers in Xinjiang will increase by 16 times compared to the previous year.
  • The Ministry of Finance (MoF) has launched the new resources tax, while the National Development and Reform Commission (NDRC) is responsible for natural gas pricing reform.
  • The NDRC may be pressured to accelerate gas pricing reform due to the narrower profit margins for oil firms.
  • PetroChina and Sinopec are expected to be negatively impacted by the new resources tax, with PetroChina suffering a larger burden.

Statistics:

  • The resources tax rate in Xinjiang is 5% on ad valorem.
  • PetroChina will pay an additional 3.6 billion yuan (US$527.094 million) per year in taxes.
  • Sinopec will pay an additional 1.4 billion yuan in tax per year.
  • The tax paid by natural gas producers in Xinjiang will increase by 16 times compared to the previous year.
  • Xinjiang produced 2.45 million metric tonnes (3.3 billion cubic meters) of natural gas in 2009.

Sources:

  • "Beijing, May 31 Asia Pulse..." (no date mentioned)
  • (XIC)maz 31-05 1600 (no date mentioned)