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Recently, the Natural Gas Sales Branch of China National Petroleum Corporation (hereinafter referred to as \"CNPC’s Natural Gas Sales Branch\") successfully carried out online bidding transactions for raw gas supply to LNG plants in April at the Chongqing Petroleum and Natural Gas Trading Center. The transactions were conducted in separate sessions for regions such as Xinjiang, northern western China, Sichuan, Chongqing, and Guizhou, thereby achieving full coverage of CNPC’s domestic LNG plant supply networks across all regions. A total of 48 LNG plants participated in these transactions. The \"monthly spot + quarterly advance purchase\" mechanism for the trading of feed gas at China National Petroleum Corporation’s LNG plants has facilitated a shift in natural gas supply from \"planned allocation\" to \"market-driven\" distribution, through standardized trading, cross-cycle risk management, and the integration of the national market. ■■New attempts at marketization: At present, domestic natural gas in China is mainly concentrated in western regions such as Sichuan Province, Xinjiang Uygur Autonomous Region, Shaanxi Province, and Inner Mongolia Autonomous Region, while natural gas consumption is primarily found in economically developed areas such as Guangdong Province, Jiangsu Province, Sichuan Province, and Shandong Province. Sun Yang, a natural gas analyst at Longzhong Information, said that China’s natural gas resources are unevenly distributed; the western regions have abundant resources, while the eastern and southern regions have high demand but limited reserves, making an efficient resource allocation mechanism urgently necessary. Starting in April, the raw gas supply for China National Petroleum Corporation’s LNG plants has moved away from the traditional offline sales model, with all transactions being handled online through the Chongqing Trading Center. This change eliminates the old approach in which users entered into annual natural gas purchase and sale contracts with local PetroChina sales units, introducing a new configuration based on continuous rolling of \"monthly spot transactions + quarterly advance purchases\". The successful implementation of this transaction marks new progress in the marketization reform of natural gas in our country, providing strong support for accelerating the development of a unified national market and ensuring **energy security. In the future, as the range of trading products continues to expand and market mechanisms are further improved, China’s natural gas market will develop in a more open, efficient, and sustainable direction. Industry experts say that this transaction improves the efficiency of resource allocation and represents an important step in the marketization process of natural gas in China. ■■There are new changes in the transactions. It is understood that there are also new changes in the auction-based transactions for raw gas supply to LNG plants this time: first, the auction area has changed ； Second, the pre-sale schedule has been changed from monthly to quarterly. In 2024, such transactions were the Xinjiang region auctions and the Western region auctions. The scope of this transaction has been gradually expanded to three regions: Xinjiang, the northern western region, and Sichuan, Chongqing, and Guizhou. The provinces and regions in the northern western region include Gansu, Qinghai, Ningxia, Shaanxi, Inner Mongolia, and Heilongjiang ； The provinces and municipalities in the southwest are Sichuan, Chongqing, and Guizhou. “This transaction includes LNG plants in provinces and cities such as Heilongjiang, Sichuan, Chongqing, and Guizhou for the first time, marking the full market-based allocation of raw gas resources for all directly-supplied LNG plants under CNPC Tianjin Branch. This has effectively enhanced the liquidity of resources and the vitality of the market. ”Sun Yang said. Another change is that the trading mechanism is carried out at appropriate times on a ten-day, half-monthly, or monthly basis, depending on market supply and demand conditions. Auction transactions follow the principle of \"highest bid wins, with time being a secondary factor\". For example, in 2024, bidding for transactions will take place two months in advance, with the pre-sale of resources for May being conducted at the end of April. In April this year, the system was changed to quarterly presales; that is, auctions for preorders of orders for May to July are held around the end of March, with auctions for preorders of orders for August to October expected to take place around the end of June. At the same time, the “premium/discount quote” method is introduced, allowing buyers to submit quantity and price offers within the price range set by the seller. “The combination of sub-regional spot and forward trading with a national unified pre-sale system not only reflects the differences in LNG markets across various regions but also establishes connections between these regional markets, which helps to further improve the efficiency of resource allocation. ■■Factories face new challenges. Sun Yang said that under the new approach, buyers can submit bids regarding quantity and price within the price range set by the sellers, which gives buyers more flexibility in determining prices. This changes the previous situation where prices were determined solely by the sellers, making the process of forming market prices more diverse and flexible. “However, for LNG plants, this leads to increased difficulties in cost estimation as well as intensified price competition among plants. ” Adjustments to the trading mechanism have significantly increased the difficulty of estimating factory costs. “In the past, the cost of gas for factories was relatively transparent, with a clear breakdown of costs, which made it easier to conduct cost accounting and production planning. Under the new trading mechanism, in quarterly pre-sale transactions, order subscriptions are made using ‘premium/discount quotes’, and the base price of the orders is determined only later on; this makes it difficult for factories to accurately estimate the cost of gas supplies in the early stages. Furthermore, the increase in transaction steps, along with the complex factors related to costs and price fluctuations at each step, further increases the difficulty of cost estimation. ”Sun Yang said. To gain an advantage in the market, factories must pay more attention to cost control, improving production efficiency, and adjusting their marketing strategies. This has led to further intense price competition among factories. “In a highly competitive environment, price becomes one of the key factors in market competition. Factories need to dynamically adjust LNG prices based on market supply and demand, cost changes, and competitors’ pricing strategies, so that the prices can reflect the actual market conditions more accurately. At the same time, competition drives factories to continuously improve product quality and service standards in order to meet customers’ diverse needs. ”Sun Yang said. Everyone, take a look – feel free to discuss and share your thoughts!