Abstract: The global natural gas markets are affected not only by commercial factors but also by noncommercial factors, such as geopolitics and different preferences of the exporting countries and importing countries. During the recent years, the dispute over natural gas trade has increased significantly with rising demand for clear energy. Both high export-dependent and import-dependent countries are easily exposed to the risks of supply disruption and price volatility. In order to lessen the negative impact of these risks, many gas-importing countries use gas reserve as an important tool. The main purpose of this paper is to study the effect of gas reserve on the quantity of gas import and gas price of a gas-importing country. To this end, the benefits and the costs of gas reserves are introduced into the utility function of a gas-importing country. The optimal solution of this problem is obtained by the theory of optimal control, and the effects of relevant factors, such as the monopoly power of an exporting country and the risk aversion of an importing country, are analyzed in detail. Results show that the optimal level of natural gas reserve will approach a steady state in the long run. Gas reserve is a useful strategy for reducing the volatility of the domestic gas price of an importing country. An increase in the monopoly power of a gas-exporting country has weaker effect on a gas-importing country's import quantity and its domestic price when the gas-importing country has a higher risk aversion toward supply disruption. An increase in the degree of risk aversion helps to decrease the accumulation speed of the gas reserve. However, the reserve has a higher level of steady state in this case. A change in the monopoly power of an exporting country has stronger effect on the optimal solution than that of an equivalent change in the risk aversion of an importing country. China's current natural gas import accounts for about one-third of its total consumption, and the gap between domestic gas production and consumption will tend to become larger in the future. Though the Chinese government has made great improvements in risk reduction by import diversification and other methods during the past decade, the domestic reserve level is still very low and the storage facilities are also limited. Our analysis is helpful to understand the role gas reserves may play and also instructive for our country to formulate a rational strategy for gas imports and reserves.

Key words: natural gas import, natural gas reserve, geopolitics, optimal control