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Tactical Portfolio Planning in the Natural Gas Supply Chain

In: Stochastic Optimization Methods in Finance and Energy

Author

Listed:
  • Marte Fodstad

    (Norwegian University of Science and Technology
    SINTEF Technology and Society)

  • Kjetil T. Midthun

    (SINTEF Technology and Society)

  • Frode Rømo

    (SINTEF Technology and Society)

  • Asgeir Tomasgard

    (Norwegian University of Science and Technology)

Abstract

We present a decision support tool for tactical planning in the natural gas supply chain. Our perspective is that of a large producer with a portfolio of production fields. The tool takes a global view of the supply chain, including elements such as production fields, booking of transportation capacity, bilateral contracts and spot markets. The bilateral contracts are typically take-or-pay contracts where the buyer’s nomination and the prices are uncertain parameters. Also the spot prices in the market nodes are uncertain. To handle the uncertain parameters, the tool is based on stochastic programming. The goal for the producer is to prioritize production over the planning period in a way that makes sure that both delivery obligations are satisfied and that profits are maximized. The flexibility provided by the short-term markets gives the producer a possibility to further increase his profits. Production and transportation booking decisions in the early periods are taken under the uncertainty of the coming obligations and prices which makes flexible and robust solutions important. There will be a trade-off between maximum profits and robustness with respect to delivery in long-term contracts.

Suggested Citation

  • Marte Fodstad & Kjetil T. Midthun & Frode Rømo & Asgeir Tomasgard, 2011. "Tactical Portfolio Planning in the Natural Gas Supply Chain," International Series in Operations Research & Management Science, in: Marida Bertocchi & Giorgio Consigli & Michael A. H. Dempster (ed.), Stochastic Optimization Methods in Finance and Energy, edition 1, chapter 0, pages 227-252, Springer.
    • Handle: RePEc:spr:isochp:978-1-4419-9586-5_11
    DOI: 10.1007/978-1-4419-9586-5_11
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