Natural gas prices in China may rise 80 percent from current levels as the government stimulates domestic production from shale to reduce its energy imports, according to Bank of America Merrill Lynch.

Gas may rise to as much as 2.6 yuan per cubic meter, equivalent to $11.4 per million British thermal units, by 2016 as the government revises its pricing formula for the fuel, Bank of America said in a report e-mailed on Tuesday.

Higher import costs and delays in signing a deal for supplies from Russia have pushed China to develop alternative plans for meeting gas demand, according to Merrill. The government's target of as much as 100 billion cubic meters of domestic annual shale-gas production by 2020 may account for as much as 28 percent of the nation's total gas consumption and "crowd out" the need for incremental imports, it said.

"We are moderately optimistic about the future of shale gas in China, given abundant resources, a strong balance sheet for the oil sector in China, and high interest in the private sector to invest in resources," Thomas Wong, a Hong Kong-based research analyst at Merrill, said in the report.

China Daily- Agencies