also in progress. China's national conditions and regional characteristics vary from the EU member states, making it impossible to exactly copy the member states’ model in China.

Considering the small national territorial area of the EU countries and the short distances for pipeline transportation, it is feasible to realise a highly interconnected network to create a single virtual hub to enable the “one price for one country” vision. China is geographically much larger than the individual countries in the European Union and, hence, is too big to have one virtual trading location across the entire country.

However, the European country-specific virtual hub model is worthy of reference for some Chinese provinces. Like the European Union, multiple hubs could be developed regionally (in member states for the European Union or in the provinces for China) to reflect the local market policy and supply and demand conditions. The virtual centre may be piloted first in the provinces with abundant gas resources or major consumption demand that have relatively complete infrastructure and good supporting conditions.

Well-planned market design is critical

Adopting local market centre pilots

Under the existing natural gas infrastructure conditions and management system in China, it will be very difficult to adopt a certain fixed model to promote market liberalisation reform nationwide, regardless of whether a national pipeline company is established. Under the constraints of various complicated contradictions, it is less likely to achieve obvious reform results in the short term like the United States and European Union did in the early reform stage. This will be a great challenge to Chinese reformers and may even cause doubts and reversals of the reform. Therefore, it may be realistic and valuable to pilot reform in regions with good conditions.

The ongoing unbundling of the pipeline will be a strong signal of reform and greatly promote the reform pace, further stimulate the vitality of the upstream and downstream, and promote the transformation of China to a competitive market. It will also be a chance for the regional gas reforms to follow, as mentioned above, in trying to establish the local competitive gas market and trading centres, which could be the virtual hub illustrated below or the physical hub in the major pipeline conjunctions.

Piloting virtual exchange centres

In the United Kingdom, the entry/exit transportation system enabled the development of the virtual trading point, the National Balancing Point (NBP). In the context of China's overall promotion of the natural gas market reform (the establishment of a national pipeline company is being planned). China is also taking the lead in piloting the regional exchanges in the regions with many gas sources, improved infrastructure, good supporting conditions and setting the internationally acceptable market price index will play a leading role in the national oil and gas system reform and natural gas price reform and conduct valuable exploration for the national natural gas market liberalisation reform path. If a virtual exchange trading point runs smoothly, it is likely to form a gas price index with regional and even global influence, which will open up a new path for the success of China's gas market liberalisation reform.

Based on the pipeline and gas resource conditions of China’s provinces, it is feasible to pilot the establishment of a virtual exchange in major resource or consuming provinces, such as