Natural gas prices in the U.S. should not be used as a reference in analyzing price adjustments in Taiwan because the two countries’ situations are not comparable, CPC Corp., Taiwan said Feb. 7.
The state-run company noted that the U.S. is a major natural gas producer, and the fuel can therefore be transported by pipeline to the end consumer at a relatively lower cost.
Taiwan, on the other hand, like Japan and South Korea, imports more than 98 percent of the natural gas it uses. Transportation of the fuel after extraction therefore involves a more complex and costlier process that includes liquefying the gas by cooling it to minus 162 degrees Celsius at liquefaction plants before shipping it by special cargo tanker to CPC storage sites in Taiwan and then reconverting it to gas form for use by consumers.
The CPC statements came at a news conference called to explain its decision to hike the price of home-use natural gas by NT$0.48 (US$0.02) per cubic meter from Feb. 1 despite a recent drop in natural gas futures prices on the New York Mercantile Exchange.
In international liquefied natural gas trade, prices are mostly calculated according to the Japan Crude Cocktail index formula, in which natural gas prices are influenced by fluctuations in international oil prices, the CPC pointed out. Natural gas rates in the U.S., on the other hand, are largely determined by NYMEX futures prices for the fuel, which is not the same measure.
The CPC further noted that the JCC index was impacted by the earthquake and tsunami in northeast Japan last March, with natural gas prices rising to US$107 in 2011. The company forecasts that prices will increase to US$109 this year.
The company said it absorbed the costs of the rising natural gas prices, resulting in losses amounting to NT$20 billion last year. With the JCC index expected to rise another 3 percent this year, the CPC said the question of whether to rationalize domestic prices needs to be reviewed under the government’s consumer price stability policy.
The CPC is authorized by the Ministry of Economic Affairs to raise domestic natural gas prices by less than 3 percent in a single month and by less than 6 percent over three consecutive months.
If planned price hikes exceed the authorized range, the CPC must first submit a report to the MOEA for approval.
The last time the CPC increased natural gas prices beyond the authorized range was November 2008. (SB)