A gas-on-gas competition trading mechanism based on cooperative game models in China's gas market

A growing number of major natural gas markets in the world have adopted the gas-on-gas competition, or are in the phase of transition to this price formation mechanism. In this situation, China has also started to reform the pricing mechanism by establishing gas trading centers in Shanghai and Chongqing, providing platforms for sellers and buyers to complete the competition-based transactions, marking a transition from oil index pricing to gas-on-gas competition pricing. In order to carry out research on China's gas market based on gas-on-gas competition trading mechanism, this paper builds a natural gas trading model based on cooperative game theory, discusses the key parameter in the models, taking into account of the representative issues of China's gas market in transformation. Also, this paper designs scenarios based on Jiangsu Province, a relatively well-established gas trading market in China, and explores the impact of each issue on the market by using the comparative analysis and sensitivity analysis. This study concludes that establishing the gas-on-gas competition model corresponds to the current gas market development in China. In addition, the market participants need to optimize the contract modes of gas supply, reduce gas supply cost and improve the price affordability, in order to maximize the cooperation benefits in gas market, increase the trading volume, promotes the development and maturation of China's gas market.