Stranded between political imperative and regulatory uncertainty: China’s move towards natural gas pricing reform

The Chinese government considers natural gas the preferred transition energy resource and is attempting to increase its proportion in China’s primary energy mix. In recent years, the reform of China’s natural gas sector has been steered towards breaking down vertical integration and developing a more market-based pricing system, the latter of which has long been subject to decisive government intervention. This article provides a comprehensive study of China’s gas pricing system through an analysis of policy and regulation. It shows that the previous reform was parochial and incremental, driven by the critical developmental conditions of China’s gas market. The gradual reform exemplifies the lack of systematic planning for the pricing reform and a relatively weak regulatory system. The latest reform has demonstrated a more systematic approach to restructuring China’s natural gas market with the improved political will to introduce competition into China’s gas market. However, the political imperative to reform natural gas pricing is challenged by the regulatory uncertainty rooted in the pre-existing conditions of China’s natural gas sector and the vested interest of industrial stakeholders. This article analyses the challenges of the latest reform to understand the limitations of the reform measures.