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In 1998, as part of the separation of government functions from enterprise management, the former China Petroleum and Natural Gas Company and the China Petrochemical Corporation were restructured according to principles of fair allocation, interaction, preservation of advantages and orderly competition, resulting in the creation of the China National Petroleum Corporation and the China Petrochemical Corporation (Sinopec).

During the liberalisation of their natural gas markets, the United States and the United Kingdom both underwent a reform process that involved a transition from government supervision and gradual deregulation. This provides valuable experience to draw on in various areas, including natural gas exploration and development, storage and transportation, pricing mechanisms, market trading and institutional guarantees.

Summarising international experience in relation to natural gas market reform, while giving special consideration to China’s specific situation, the creation of a natural gas market system and reform of administrative systems should embody the principles described below.

At different stages of the development of the natural gas industry, markets exhibit different characteristics depending on the different levels of competition and different problems encountered, and thus the focus of reforms should also differ. In general, no stage in the reform process can be left out, as each key issue must be dealt with effectively to ensure that policy and adoption of measures keep step. This approach should achieve a balance between the three aspects of timing, location and quantity.

The fourth plenary session of the Communist Party Central Committee proposed the creation and completion of a legislative system, constituting a historical move towards the creation of the conditions necessary for legislative reform, laying the foundation for future legislative work. Thus legislative work should take a leading role in promoting economic and social development, which will involve a transition from “policy-guided action” to “legally guided action”, ensuring that reform and legislation keep step, and that reforms occur according to the law.

Throughout the world, natural gas is gaining prominence in national energy systems. In many economies its share of the energy mix is growing. Major factors behind this global growth include market liberalisation, a switch from other fuel sources and improved access to unconventional natural gas reserves. Environmental and energy security considerations have added impetus to the trend.

Global natural gas consumption, both in absolute terms and as a share of the energy usage mix, is continuing to grow. This growth has been driven primarily by changes in patterns of economic activity, energy intensity and energy substitution. Of these, the primary driver has been the switch to natural gas from other sources, primarily oil. Natural gas prices have consistently remained high in recent years, but despite this and the fact that gas has not been given any major preferential advantage compared to other energies, there has been no marked dampening of demand.

As part of our study, we looked at the evolution of natural gas markets in five selected countries that experienced significant increases in gas demand over the last few decades.

The previous section set out international experience in the development and evolution of natural gas markets. A key insight from the five country case studies is that liberalisation requires different regulatory approaches for different parts of the natural gas value chain.