requirements are essential to initiate a natural gas market and should be guaranteed by an independent regulator.

The most advanced phase of development – towards a functioning market – implies the establishment of a platform for the ownership exchange of natural gas, which will ensure that the resulting price reflects the current and future state of the market. The physical hub (which could be either geographical, such as in the United States, or virtual, such as in Europe), initially resulting from bilateral trade and progressively moving to centralised, exchange-based trading, will thus be completed by “paper” or “financial” trade for future delivery.

Reform is a systematic project that needs time to be carried out gradually and effectively. The primary goal of market opening and liberalisation should be to deliver benefits to consumers through access to efficient market pricing, better and innovative service offerings from suppliers, and improved security of supply delivered through creating investment opportunities. Establishing functioning competition in the market is the best way of achieving this, and it should be co-ordinated, matched, and implemented step by step. With reference to the international natural gas market liberalisation reform process, China’s reformers should fully realise the longterm nature and complexity of the natural gas reform and have maintain determination to make unremitting efforts towards achieving its goals.

China will develop a unique market model

The United States, the European Union, and other countries have established market-reflective natural gas pricing mechanisms and natural gas spot trading centres, which form the basis of natural gas futures markets and other derivative financial products markets. The establishment of natural gas trading centres has promoted the efficient allocation of natural gas resources in these markets and also created conditions for the natural gas market to achieve a higher level of development.

The United States provides a best-practice example of highly liquid natural gas commodity and pipeline markets. The trading models and instruments gradually formed in the US market, as well as the numerous market-based solutions help address resource allocation problems and investment, are of referential significance for other countries to liberalise the natural gas market. The experiences and lessons of the United States, Europe, and other countries in building gas exchanges can serve as a beneficial reference for the construction of natural gas markets in China. However, it should be noted that the market design and route of natural gas reform cannot be completely consistent in any country as the resource conditions, market foundation, and energy management systems vary among each country. The regulations and implementation of efforts to liberalise these gas markets were different in each market and the path for China will be unique. While, the models of the United States, Europe and other countries cannot be copied in their entirety for China's natural gas market path design, they can provide valuable insights and lessons as China explores its market reform considering its national conditions and basic conditions.

Comparison to the US model

The features of the US natural gas market are similar to those of China in many aspects, such as the wide geographical scope, the remote gas source from the consumption centre, and a largescale natural gas market. Therefore, how the United States achieved its competitive market model is of important reference value for China.

The US natural gas market is highly interconnected and has thousands of market players, including upstream natural gas companies ranging from small independent companies to companies affiliated with large multinational companies, regional distributors, independent traders, and large end users, etc. with equally fair access to infrastructure. At present, China lacks diversified upstream market players and widespread TPA. China has realised diversification in downstream natural gas sales, but the diversification of the resource supply has been relatively slow, and the main natural gas sources are still controlled by CNPC, Sinopec, and CNOOC. China has adopted the independent tendering model for shale gas development, and the number of LNG import enterprises has been gradually increasing, but there are still very few market players that can provide resource supply. Diversified market players are not only an important indicator for the success of a market but are an important factor that affects liquidity.

China's natural gas pipeline network is still in fast development period, with poor connectivity between the pipelines. At present, the natural gas pipeline network in China is mainly composed of trunk lines and provincial pipeline networks (NEA, 2018). There is a low degree of interconnection between trunk lines, and provincial pipeline networks, and between coastal LNG terminals and main pipelines. There are many isolated islands of regional gas sources or LNG stations and few hub stations with interconnections or pipelines with two-way gas transmission. Because the pressure of the pipeline networks also does not match, surplus gas sources and LNG terminal capacity cannot be effectively utilised. These factors make it difficult for China to form many-to-many transactions similar to the United States.

The greatest step adopted by the United States in achieving its current market participation came in 1992-93 with Federal Energy Regulatory Commission (FERC) Order 636, which required the complete separation of sales from pipeline transportation (“unbundling”) so that customers could select their supply from any competitor in any quantity and arrange transportation with a regulated pipeline operator. Interstate pipelines were no longer allowed to sell natural gas and were restricted to providing transparent, non-discriminatory transportation services. Due to this radical change, many producers and end users did not want to incur the expense of having to hire staff to either directly market or procure supply and transportation services. Thus, a niche developed for gas marketers, companies that neither own equity production nor are end users, but instead purchase gas supplies and either sell these volumes directly to end consumers or resell them to other marketers. FERC Order 636 also spurred the development of market centres, which further drove additional pipeline interconnections. Pipelines offering transportation services were incentivised to connect with other pipelines to increase the value of their transportation services. These steps have promoted the participation of a wider range of market players in natural gas pricing and the timely discovery and control of natural gas prices by the market. These conditions are also very limited in China.

Comparison to the EU model

European countries share similarities with China in terms of their natural gas industry systems (for example, most countries had only one or two natural gas pipeline monopolies, and most natural gas suppliers were oligopolies in the initial stages of reform). Europe also imported a lot of gas, much as China does now. Some European countries do not have liquid competitive markets like North America and are working to further develop their markets, which is similar to China's situation. Although the national conditions and background of natural gas exchange hubs in Europe are different from those in China, the fresh experience in establishing natural gas exchange hubs in Europe and the different pace of development in different countries can still provide valuable experiences for developing natural gas exchanges in China (DENG, 2017). However, it should also be noted that the market reform of natural gas in European countries is