By Wang Ying
Feb. 19 (Bloomberg) -- China, the world’s second-biggest energy consumer, is likely to approve a stimulus package for the oil refining and petrochemicals industries today to help spur the slowing economy, the country’s energy chief said.
The State Council will discuss the stimulus today, Zhang Guobao, head of the National Energy Administration, said on the sidelines of an industry conference in Beijing. “I feel there should be no problem.”
China’s economy, the world’s third largest, expanded at the slowest pace in seven years in the last quarter, cutting consumption of fuels and petrochemicals. The stimulus plan will add to the 4 trillion yuan ($585 billion) of spending that the government announced in November to support the economy amid the global recession.
The government has no separate stimulus package for the entire energy industry, Zhang said.
China may raise the trigger level of a windfall tax levied on the nation’s oil producers to $60 a barrel from $40, China Business News reported on Feb. 10, citing an unidentified industry “expert.”
The National Development and Reform Commission, the country’s top economic planner, is drawing up proposals to support PetroChina Co. and China Petroleum and Chemical Corp., including possibly subsidizing them for their losses from refining oil, the Shanghai-based newspaper said at the time.
Shares in China Petroleum, the nation’s biggest refiner, dropped 0.5 percent to HK$4.21 in Hong Kong at 10:26 a.m. local time. Rival PetroChina fell 1 percent to HK$5.86. The Hang Seng Index declined 1.2 percent.
Slowing Economy
China’s new loans rose by a record in January and money supply expanded at the fastest pace in more than a year as the government pressured banks to support stimulus plans, the People’s Bank of China, the central bank, said on Feb. 12.
The government will build six energy projects this year under the 4 trillion-yuan spending plan, the National Development and Reform Commission said on Nov. 12. The projects include 10 nuclear power reactors with a capacity of 1,000 megawatts each. PetroChina will start building a 10 million metric-ton-a-year refinery in Sichuan province.
When asked if China will lower fuel prices, Zhang said, “A mechanism is already in place, and we should follow it.”
The government cut fuel prices last month and in December to reflect declining global oil prices and reduce costs for factories as the economy slows. A guidance band for retail fuel prices was replaced last year with a market-based ceiling that takes into account the cost of crude oil.
Coal Prices
Consumption of electricity has also waned as the global economic slump curbs Chinese exports. Amid slowing power demand, annual supply talks between generators and coal companies have been in a deadlock after the five biggest state power producers rejected in December a 10 percent price increase.
Domestic contract prices for coal used in power stations should be “market-based,” Zhang said.
The demand to increase prices by 50 yuan ($7.30) a metric ton this year is “reasonable” as coal producers will be paying higher taxes, the Beijing Times said on Feb. 6, quoting Zhang.
“The newspaper misunderstood me,” Zhang said today.
To contact the reporter on this story: Ying Wang in Beijing at ywang30@bloomberg.net
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