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Applying a third party access model for China’s gas pipeline network: an independent pipeline operator and congestion rent transfer


  • Jing Xu

    () (Fudan University)

  • Michelle Hallack

    () (Universidade Federal Fluminense
    IEFE – Bocconi University)

  • Miguel Vazquez

    () (Universidade Federal Fluminense
    IEFE – Bocconi University
    Center for Regulation and Infrastructure Studies (CERI))


Abstract This paper investigates third party access regulatory issues in China’s natural gas industry. We study the development of China’s gas market-oriented reform and how third party access becomes a pressing issue in that context. This paper aims to report stakeholders’ benefit and distributional effects during a hypothetical third party access process. To that end, we apply an oligopolistic equilibrium model, based on the mixed complementarity problem, to China’s gas pipeline network. We compare two scenarios: a scenario without third party access and the other scenario where an independent pipeline operator optimizes flows. This latter scenario aims to guarantee that the maximum social benefit is achieved. In addition, the latter scenario transfers the congestion rent to former integrated gas companies to compensate their actual loss control of the pipeline operation, in order to minimize the adverse distributional effects for pipeline companies. The solution of the model indicates that operational separation is feasible with Pareto improvement in China’s context. Moreover, it merits particular attention from policy makers in China that pipeline capacity scarcity should be properly evaluated and managed.

Suggested Citation

  • Jing Xu & Michelle Hallack & Miguel Vazquez, 2017. "Applying a third party access model for China’s gas pipeline network: an independent pipeline operator and congestion rent transfer," Journal of Regulatory Economics, Springer, vol. 51(1), pages 72-97, February.
  • Handle: RePEc:kap:regeco:v:51:y:2017:i:1:d:10.1007_s11149-017-9316-z
    DOI: 10.1007/s11149-017-9316-z

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    References listed on IDEAS

    1. Lise, Wietze & Hobbs, Benjamin F. & van Oostvoorn, Frits, 2008. "Natural gas corridors between the EU and its main suppliers: Simulation results with the dynamic GASTALE model," Energy Policy, Elsevier, vol. 36(6), pages 1890-1906, June.
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    5. Steven A. Gabriel & Supat Kiet & Jifang Zhuang, 2005. "A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets," Operations Research, INFORMS, vol. 53(5), pages 799-818, October.
    6. Miguel Vazquez, Michelle Hallack and Jean-Michel Glachant, 2012. "Building gas markets: US versus EU, market versus market model," RSCAS Working Papers 2012/10, European University Institute.
    7. Ma, Chunbo & He, Lining, 2008. "From state monopoly to renewable portfolio: Restructuring China's electric utility," Energy Policy, Elsevier, vol. 36(5), pages 1697-1711, May.
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    Cited by:

    1. Rioux, Bertrand & Galkin, Philipp & Murphy, Frederic & Feijoo, Felipe & Pierru, Axel & Malov, Artem & Li, Yan & Wu, Kang, 2019. "The economic impact of price controls on China's natural gas supply chain," Energy Economics, Elsevier, vol. 80(C), pages 394-410.
    2. repec:eee:appene:v:228:y:2018:i:c:p:149-166 is not listed on IDEAS
    3. repec:eee:ejores:v:273:y:2019:i:3:p:1097-1108 is not listed on IDEAS

    More about this item


    Third party access; Mixed complementarity problem; Congestion rent transfer; Independent pipeline operator; China’s gas market-oriented reform;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities


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