The policy will encourage oil companies to build more natural gas pipelines and cities to put into service more buses and taxies powered by natural gas, sources with the National Development and Reform Commission was quoting as saying.

   But local governments will need to be persuaded that the operation of gas-powered buses will be financially viable as the report also states that the government will raise the price of natural gas "in the near future" to encourage energy efficiency.

   Restrictions will be imposed on the synthetic ammonia and formaldehyde industries, which use natural gas as a raw material, in order to make natural gas supply available to other sectors.

   It also aims to help the gas-rich but economically underdeveloped regions to develop the advanced processing industry and prevent local governments around the country from embarking on "excessive" natural gas projects.

   China's natural gas output rose from 27.2 billion cubic meters in 2000 to 49.3 billion cubic meters in 2005, outpacing the growth in the output of any other form of energy in the period. But the supply is still falling short of the soaring demand.