Chinese Ministry of Commerce will cancel the administration of automatic import licenses on 32 tariff items, including natural gas and LNG, effective from June 10, 2007, putting an end to the free import system that allows any enterprise to directly import natural gas from the international market.

   According to Xinhua-run Shanghai Securities News, the purpose of eliminating automatic import licenses of natural gas and LNG is to quench disorderly competition spurred by purchase spree of China's local governments, which resulted in abnormally high selling price in China.

   Han Xiaoping, vice president of Qunying Energy Consulting Firm told Shanghai Securities News that some Chinese local governments had been vying for buying natural gas from the international market so as to reach the central government's requirement of lowering energy consumption on unit GDP. Experts analyzed that since these local enterprises usually purchased a small quantity of natural gas or LNG from the international market, they had to bid up the price of contracts, further causing international sellers to lift up the prices.

   China has determined to cut down unit GDP energy consumption by 20 percent till 2010.

   Influenced by the disorderly competition, China's three oil majors, CNPC, Sinopec and CNOOC, have been negatively affected. Typically, Indonesia has increased its LNG price from 25 US dollars/barrel to the present 38 US dollars/barrel, and possibly, Russia may upward adjust its natural gas price to 180 US dollars per thousand cubic meters.

   Yang Fuqiang, chief representative of American Energy Fund China, showed in a positive tone that China's move to eliminate administration of automatic import licenses could play a role in holding back some enterprises' impulse of import and lowering the international natural gas price.

   Han Xiaoping believed that putting an end to free import of natural gas might help China's oil majors have bigger say as purchasers in the international market.

   China's three majors will likely be China's sole natural gas importers afterwards. Considering that local governments and enterprises have to turn to them for natural gas, China's oil majors' monopoly position in the fields of natural gas would be further strengthened.