Can the Shanghai LNG Price Index indicate Chinese market? An econometric investigation using price discovery theory

Zeng, Yeli; Dong, Cong; Höök, Mikael; Sun, Jinhua; Shi, Danyang

doi:10.1007/s11708-020-0701-4

Cited by 12 publications

(7 citation statements)

References 39 publications

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“…The market reforms have caused domestic gas price in China to move closely with international gas prices (Zhang, 2018) and market fundamentals (Wang et al, 2022). Two gas exchanges, SHPGX and CQPGX, have been established to provide price signals and facilitate competition in the gas market (Wang et al, 2020; Zeng et al, 2020). The series of government‐driven market reforms are believed to change natural gas market structure especially imported gas markets in China.…”

Section: Discussionmentioning

confidence: 99%

“…The results revealed that the long‐run equilibrium exists between SHPGX LNG Price Index and other energy prices even though price discovery process is not adequate and market is not transparent enough. Zeng et al (2020) believe that, with China's gas reforms, SHPGX Price Index will provide market participants more information to improve their trading decision. Wang et al (2020) examined the key factors to affect prices of imported natural gas in China to comprehend the effect of the pricing reforms focusing on imported LNG and pipeline gas prices.…”

Section: Review Of Related Studiesmentioning

confidence: 99%

“…In the reform, market decides prices for most (about 80%) of industrial and commercial natural gas uses (Wang et al, 2022), which has increased competition in the markets for gas. Shanghai and Chongqing Petroleum and Natural Gas Trading Centers have established to offer platforms to disseminate price signals to market participants for this purpose (Wang et al, 2020; Zeng et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

“…The new price determination connected natural gas price with international energy prices such as fuel oil. China further liberalised natural gas markets by establishing Shanghai Petroleum and Gas Exchange (SHPGX) in 2015 (Zeng et al, 2020). SHPGX provides price indices for LNG, pipeline, Liquefied Petroleum Gas (LPG), and petroleum.…”

Section: Introductionmentioning

confidence: 99%

“…Investigating the effects of the market reforms has been done in some empirical studies, mostly policy perspective, for example, Paltsev and Zhang (2015), Hu and Dong (2015), Dong et al (2018), Zhang and Yang (2015), Wang et al (2020), Zeng et al (2020), and Lin and Li (2021). Understanding imported gas market structure in China using the price discovery approach is new to the literature.…”

Section: Introductionmentioning

confidence: 99%

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Market reforms and dynamic price discovery in imported natural gas markets in China

Wang

Kim

2022

OPEC Energy Review

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A series of policies has been implemented in China to liberalise natural gas markets which is known as the market reforms. The goals of the market reforms are basically to establish competitive natural gas markets with its gas hubs and increase natural gas consumption in the energy mix (NEA, 2014; Paltsev & Zhang, 2015). It is believed that natural gas markets have experienced multiple structural breaks with a series of the market reforms in the last decade, especially, in imported liquefied natural gas (LNG) and pipeline markets. Understanding gas market structure and identifying structural breaks in these markets provide stakeholders and policymakers with insights of the markets. This paper investigates these changes focusing on the dynamic interrelationship between imported LNG and pipeline prices using the price discovery framework.The pricing reforms encourage third parties to make use of infrastructure more efficiently and disintegrate major energy monopolies of the three National Oil Companies (Cornot-Gandolphe, 2019). The primary reason for the pricing reforms is to use more natural gas instead of oil and coal in order to mitigate air pollution and carbon emissions in China 1 (Zaretskaya, 2017). According to the 13th Five-Year Plan of China and the latest Energy Production and Consumption Revolution Strategy (2016-2030), Chinese administration wants to increase the share of natural gas consumption to 10% of energy mix by 2020 and 15% by 2030 from 6% in 2015 (Zaretskaya, 2017). As a result, natural gas demand in China has grown rapidly. China currently accounts for almost 40% of global growth of natural gas consumption (Dewar,

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