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Optimal LNG (liquefied natural gas) regasification scheduling for import terminals with storage

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  • Trotter, Ian M.
  • Gomes, Marília Fernandes Maciel
  • Braga, Marcelo José
  • Brochmann, Bjørn
  • Lie, Ole Nikolai

Abstract

We describe a stochastic dynamic programming model for maximising the revenue generated by regasification of LNG (liquefied natural gas) from storage tanks at importation terminals in relation to a natural gas spot market. We present three numerical resolution strategies: a posterior optimal strategy, a rolling intrinsic strategy and a full option strategy based on a least-squares Monte Carlo algorithm. We then compare model simulation results to the observed behaviour of three LNG importation terminals in the UK for the period April 2011 to April 2012, and find that there was low correlation between the observed regasification decisions of the operators and those suggested by the three simulated strategies. However, the actions suggested by the model simulations would have generated significantly higher revenues, suggesting that the facilities might have been operated sub-optimally. A further numerical experiment shows that increasing the storage and regasification capacities of a facility can significantly increase the achievable revenue, even without altering the amount of LNG received, by allowing operators more flexibility to defer regasification.

Suggested Citation

  • Trotter, Ian M. & Gomes, Marília Fernandes Maciel & Braga, Marcelo José & Brochmann, Bjørn & Lie, Ole Nikolai, 2016. "Optimal LNG (liquefied natural gas) regasification scheduling for import terminals with storage," Energy, Elsevier, vol. 105(C), pages 80-88.
    • Handle: RePEc:eee:energy:v:105:y:2016:i:c:p:80-88
    DOI: 10.1016/j.energy.2015.09.004
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    References listed on IDEAS

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    1. Longstaff, Francis A & Schwartz, Eduardo S, 2001. "Valuing American Options by Simulation: A Simple Least-Squares Approach," The Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 113-147.
    2. Rene Carmona & Michael Ludkovski, 2010. "Valuation of energy storage: an optimal switching approach," Quantitative Finance, Taylor & Francis Journals, vol. 10(4), pages 359-374.
    3. Guoming Lai & François Margot & Nicola Secomandi, 2010. "An Approximate Dynamic Programming Approach to Benchmark Practice-Based Heuristics for Natural Gas Storage Valuation," Operations Research, INFORMS, vol. 58(3), pages 564-582, June.
    4. Longstaff, Francis A & Schwartz, Eduardo S, 2001. "Valuing American Options by Simulation: A Simple Least-Squares Approach," University of California at Los Angeles, Anderson Graduate School of Management qt43n1k4jb, Anderson Graduate School of Management, UCLA.
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    Cited by:

    1. Hyonjeong Noh & Kwangu Kang & Cheol Huh & Seong-Gil Kang & Seong Jong Han & Hyungwoo Kim, 2019. "Conceptualization of CO 2 Terminal for Offshore CCS Using System Engineering Process," Energies, MDPI, vol. 12(22), pages 1-18, November.
    2. Charis Ntakolia & Michalis Douloumpekis & Christos Papaleonidas & Violetta Tsiampa & Dimitrios V. Lyridis, 2023. "A Stochastic Modelling and Optimization for the Design of an LNG Refuelling System in the Piraeus Port Region," SN Operations Research Forum, Springer, vol. 4(3), pages 1-32, September.

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