Flexibility modelling of natural gas contracts

Date

2015-05-16

Author

Kestel, Sevtap Ayşe
Kalaycı, Erkan

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This paper aims to develop a novel algorithm based on all contractual and technical real-world constraints for a gas import/wholesale company in the concept of flexibility. The Mixed Integer Linear Program (MILP) is applied to a portfolio of contracts to produce the optimal amount of purchases pipeline natural gas (PNG) agreements, spot natural gas purchases, natural gas storage use levels and Session IV (16:00-17:30) – ENERGY & FINANCE 18 LNG purchases based on a real life case under various commitments such as Monthly Contract Quantity (MCQ), Annual Contract Quantity (ACQ), pipeline capacity, LNG and storage constraints. Multivariate Adaptive Regression Splines (MARS) is applied to the natural gas demand to determine its future movements by incorporating inputs such as heating degree days (HDD), cooling degree days (CDD) and one-period earlier gas supply realizations. The output of the proposed model enables local distribution companies (LDCs) to develop criteria on producing the optimal future natural gas purchases based on different oil scenarios. Along with World Bank (WB) oil forecasts, we suggest a stochastic model (ARIMA) based on historical oil prices. A case study on a local distribution company in ˙Istanbul city is employed to illustrate the long term gas purchase price curves for different Take-or-Pay (ToP) rates which is aimed to guide the LDCs on their willingness to pay for long term natural gas contracts. The main outcome of this article is the determination of the long term price curves for LDCs under demand and supply constraints and an application for the ˙Istanbul natural gas market for the first time in literature. Keywords: Natural Gas, C

Subject Keywords

Natural Gas, Consumption Forecast, Multivariate adaptive regression splines (MARS), , Optimal contract decision, ARIMA, Oil price, Mixed integer linear programming (MILP)

URI

http://www.centerforenergyandvalue.org/conf2017/files/6th%20Multinational%20Energy%20Value%20Conference%20Program%20and%20Abstracts%20of%20the%20Papers.pdf
https://hdl.handle.net/11511/79011

Conference Name

55.EURO Working Group “Commodities and Financial Modelling Conference, 814 - 16 Mayıs 2015)

Collections

Graduate School of Applied Mathematics, Conference / Seminar

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Citation Formats

S. A. Kestel and E. Kalaycı, “Flexibility modelling of natural gas contracts,” presented at the 55.EURO Working Group “Commodities and Financial Modelling Conference, 814 - 16 Mayıs 2015), Ankara, Türkiye, 2015, Accessed: 00, 2021. [Online]. Available: http://www.centerforenergyandvalue.org/conf2017/files/6th%20Multinational%20Energy%20Value%20Conference%20Program%20and%20Abstracts%20of%20the%20Papers.pdf.