Assessment of import risks for natural gas and its implication for optimal importing strategies: A case study of China

Abstract

China's growing dependence on foreign natural gas has garnered increased attention to import risks and exposure. The purpose of this study is to serve as a vital guide in formulating an energy policy framework that aims at assessing and mitigating the impacts of natural gas import risks (NGIR). First, the paper constructs a NGIR evaluation framework with full consideration of resource risk, political risk, transport risk, price volatility risk, purchasing power risk and dependence risk. The relative weight of various risk factors is also identified for importing gas from different sources. Building on this, we use a linear programming model to optimize China's gas import sources based on the minimization of import risks. The results show that China's NGIR exhibited increasing trends in 2010–2014, with variation in the largest risk factors by national gas supplier. For Turkmenistan and Indonesia, the greatest risk is dependence; for Qatar, price volatility risk; for Yemen, Australia and Uzbekistan, resource risk; and for Malaysia, purchasing power risk. Along with other policy recommendations, our optimization results indicate that increasing the proportion of Chinese gas imports from potential suppliers, such as Russia and the United States, is an effective approach to reduce NGIR.