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Gas Portfolio and Transport Optimization



ISSN 1745-8587 B irk be ck W or ki ng P ap er s in E co no m ic s & F in an ce School of Economics, Mathematics and Statistics BWPEF 0615 Gas Portfolio and Transport Optimization Gido AJF Brouns Essent Energy Trading Alexander F Boogert Birkbeck, University London March 2006 ▪ Birkbeck, University of London ▪ Malet Street ▪ London ▪ WC1E 7HX ▪ Gas Portfolio and Transport Optimization Gido A.J.F. Brouns∗ Alexander F. Boogert∗,† March 1, 2006 1 Introduction The transport of natural gas has received significant attention in the last months with the large price spikes in the UK facing sudden cold weather and the flow stop from Russia to Ukraine. Transport is a necessity in a world where gas sources are far removed from the gas demand, and in which a gas portfolio easily spans several countries. Meanwhile, the range of options within a gas portfolio is growing with an increasing number of instruments and increasing international gas trading. This has led to a situation where decisions have become non-trivial. The objective of this article is to describe the construction of an integrated approach for gas portfolio and transport optimization. In general an energy company with a gas portfolio is faced with gas deliveries at various locations, gas consumers at other locations and a grid of pipelines connecting them. While the supplies and demands change over time, the energy company must balance the flows at all times. In practice, the energy company has many instruments available in order to make the flows balance and should decide which ones to choose and how to utilize them. In this article we put an emphasis on costs and consider the central question of how to balance the gas network such that the operational costs are kept as low as possible. In the next section we first identify the different instruments constituting a gas portfolio and transport system. Then we describe the cost

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