Guangdong Province, a major coastal manufacturing center in the Pearl River Delta, has set a transportation tariff for offtake from the 2nd West-East Gas Pipeline (WEP II), the Guangdong Provincial Pricing Bureau (GPPB) said in a news bulletin issued on Tuesday.

The tariff is mainly determined by distance and fixed for each pipeline. The GPPB has set the transportation levy at RMB 0.26 ($0.04) per cubic meter (cm), meaning that city-gate prices in the province will stand at RMB 3/cm ($0.47). Guangdong Natural Gas Grid Co. Ltd. pays China National Petroleum Corp. (CNPC) RMB 2.74/cm ($0.43) to offtake WEP II supply.

Guangdong's pipeline charge is significantly below what analysts had forecast, and lower than tariffs elsewhere in the country. JP Morgan suggested in an April research report China Oil and Gas that the levy was likely to be similar to the RMB 0.84/cm ($0.13) charged for WEP deliveries to Shanghai. The GPPB said it will maintain the tariff until December 31, 2014.

The tariff was likely set low to incentivize switching to gas from fuel oil and liquefied petroleum gas. The low price will benefit CNPC by encouraging gas purchases from WEP among Guangdong's distributors, Zhuochuang Information analyst Li Lingxuan told Interfax on Wednesday.

Beijing introduced market-based gas pricing reforms in Guangdong and neighboring Guangxi Zhuang Autonomous Region at the end of last year. Both areas were selected because they were due to start receiving gas from WEP II this year, and already have liberalized gas prices from extensive imports of gas.

The GPBB also set prices that Guangdong Natural Gas can charge power plants and commercial and industrial consumers in the province. The price of gas for power generation will be RMB 3.01/cm ($0.47), while gas used by commercial and industrial consumers stands at RMB 3.03/cm ($0.47).

Guangdong Natural Gas is the exclusive operator of the province's pipeline network. Established in 2008 with registered capital of RMB 1 billion ($157.5 million), the company is a joint venture between Guangdong Yudean Group Co. Ltd. and China's three state-owned majors.

CNPC entered into the partnership last year by securing a 23 percent shareholding in November, a move that diluted the stakes of Yudean, China National Offshore Corp. and China Petrochemical Corp. to 28 percent, 26 percent and 23 percent, respectively.

WEP II has supplied more than 50 million cubic meters of gas to Guangdong's capital of Guangzhou since November 28, 2011, state media reported on Tuesday.