Abstract
With the rapid development of economy and improvement of people ’s standard of life, there is an increasing demand for urban gas energy in China. The traditional pattern of urban gas supply chain in China now is distributed through urban gas company or directly to the downstream customers from gas suppliers such as Petro China, Sinopec and CNOOC. In this paper, after analyzing the traditional urban gas supply chain in China, we find that the performance is unsatisfied because the traditional mode is di fficult to match the supply and demand very well for inŽexibility. We propose that option contract can be introduced to the urban gas supply chain to deal with such problems. With options,the urban gas company can adjust order quantities according to the updated demand forecast, and transmit a portion of market risks to the urban gas company. The gas supplier, besides compensation from the revenue to sell options, can know the range of the adjustment, which is very important for the production decision. Since both the urban gas company and the gas supplier can benefit from options, and then the traditional operation mode of urban gas supply chain is improved.
