Improving infrastructure development and interconnection

Various measures taken by the Chinese government to increase the diversification of upstream gas suppliers are being pushed forward. No matter whether a breakthrough can be made within a certain period of time, the current challenges, such as insufficient length and density of China's natural gas pipelines and low level of interconnection, need to be solved quickly. Therefore, it is urgent to accelerate the construction of pipelines, LNG terminals and other projects in the planning, and accelerate pipeline interconnection.

The pipelines interconnection is important to facilitate the TPA. Both in the United States and European Union, the interconnections of the infrastructure are all crucial to the TPA. In the United States, there are more than 1 400 interconnection points, and in the European Union, there are 183 cross-border pipeline interconnection points.

Putting the market at the centre

Transparency

Transparency and availability of data are essential for building confidence among market players. This ranges from transparency regarding pricing, to the availability of the terms and conditions of access to the pipeline system, and potentially to LNG import terminals and storage facilities. This represents a critical factor in preventing discrimination among shippers, encouraging access and competition, and ensuring efficient operation of the industry.

In the United States and the European Union, the transmission system operator (TSO) or pipeline companies are responsible for managing gas flows the and gas quality. Effective management is inseparable from transparency.

The regulator could also require that the pipeline companies set up similar electronic bulletin boards (EBB) to display the pipeline transportation capacity (location, designed pipeline transportation capacity, operating pipeline transportation capacity, planned gas transportation volume, available pipeline transportation capacity, and interruptible pipeline transportation capacity) and customer information (shipper name, whether affiliated or not, the rate, effective date of contract, bilateral negotiation rate, etc.).

The experiences of the United States and the European Union on information transparency are worth learning for China. Information platforms, such as EBB, would be a useful tool for transparency. In the future, the supervision of China’s National Gas pipeline corporation will involve much information disclosure.

Deregulate the price and have the price index

The gradual deregulation of the price should be another way to proceed instead of a sudden deregulation. In the United Kingdom and the United States, it took a several years to achieve true market gas price. The establishment of gas hubs (exchanges) is the key to establishing price signals. However, there are some previously mentioned preconditions for the success of natural gas hubs: putting market players at the centre (by fostering competition from both supply and demand and creating the adequate conditions for market-driven investment in new capacity expansions) and the transition from direct government intervention to regulatory oversight. With such preconditions, exchanges are in a position to see their trading activity