Analysis on High-Quality Development of Natural Gas Industry in China

Abstract

China’s natural gas market is undergoing profound changes. Since 2011, China has made great efforts to promote the reform of mining rights, especially prospecting rights, and the number of oil and gas exploration and development market players has increased from four to more than 40. The import of liquefied natural gas (LNG) has basically realized the diversification of countries and subjects, with 27 importing countries/trading partners, and more than 20 domestic enterprises have entered the field of LNG procurement. Pipelines are the main medium of natural gas transportation in China, and all national pipelines have been consolidated in PipeChina, while provincial pipeline networks are actively promoting the separation of transmission and sales. CNPC, Sinopec and CNOOC are the absolute main force of natural gas wholesale, provincial energy companies are the main force of intermediate sellers, and municipal gas companies are the main players in the natural gas retail market, with more than 1,000 municipal gas enterprises active in China. In terms of upstream and midstream gas prices, outlet prices and pipeline prices co-exist, with government regulation and market-based pricing complementing each other, and rules for pipeline network operations focus on fair access to infrastructure. There are two national and three regional natural gas trading platforms in China. Natural gas regulation adopts a model of differentiated management between oil and gas, coordinated governance and regulation, multi-level management and decentralized supervision. In the new situation, the natural gas industry still faces great challenges to achieve high-quality development, and needs to reasonably address the rhythm between the liberalization of upstream exploration and development and the assurance of natural gas supply, the resonance between the construction of a natural gas pricing mechanism and the competitiveness of the industry, and the synergy between the near-term growth of natural gas and the reduction of carbon emissions in the long term. It is suggested to deepen the reform and accelerate the diversification of natural gas suppliers; driven by innovation, steadily promote price reform and market-oriented development; take the initiative to establish and improve the natural gas supervision system; establish a strategic mindset and plan the transformation and upgrading of natural gas in a scientific manner.