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Pushing forward natural gas pricing reform through netback market value (No 148,2014)


By Guo Jiaofeng, Gao Shiji, Hong Tao, Wu Xu, Wang Haiqin, Li Weiming, and Yang Jianhong, Research Institute for Resources and Environment Policies, Development Research Center of the State Council (DRC)

Report No 148, 2014 (Total 4647)


The current natural gas pricing policy has a price adjustment mechanism that takes the supply-demand relationship and the scarcity of resources into consideration to help straighten out price differences between natural gas and alternative energy sources, and provide a foundation for a natural gas pricing method that is market-determined.

Pushing forward natural gas pricing reforms in China has to consider the following relationships: supply and demand, cost and price, affordability and price, subsidies and price, and natural gas-oil–coal price. It is also important to avoid oversupplying natural gas and using coal to replace natural gas. The government needs to consider the particular nature of the natural gas industry, the influence of gas price reforms, and the uncertainty of the market to make necessary arrangements. As the natural gas market develops, China could push forward a reform in natural gas prices by adopting the market net back value method, and eventually reach its goal of an open, fair, competitive and orderly natural gas pricing mechanism.