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A Complementarity Model for the European Natural Gas Market

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  • Ruud Egging
  • Steven A. Gabriel
  • Franziska Holz
  • Jifang Zhuang

Abstract

In this paper, we present a detailed and comprehensive complementarity model for computing market equilibrium values in the European natural gas system. Market players include producers and their marketing arms which we call "transmitters", pipeline and storage operators, marketers, LNG liquefiers, regasifiers, tankers, and three end-use consumption sectors. The economic behavior of producers, transmitters, pipeline and storage operators, liquefiers and regasifiers is modeled via optimization problems whose Karush-Kuhn-Tucker (KKT) optimality conditions in combination with market-clearing conditions form the complementarity system. The LNG tankers, marketers and consumption sectors are modeled implicitly via appropriate cost functions, aggregate demand curves, and ex-post calculations, respectively. The model is run on several case studies that highlight its capabilities, including a simulation of a disruption of Russian supplies via Ukraine.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.69083.de/dp732.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 732.

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Length: 39 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp732

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Keywords: European natural gas market; global LNG market; mixed complementarity problem;

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References

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  1. Stern, Jonathan, 2005. "The Future of Russian Gas and Gazprom," OUP Catalogue, Oxford University Press, number 9780197300312, September.
  2. Gabriel, Steven A. & Zhuang, Jifang & Kiet, Supat, 2005. "A large-scale linear complementarity model of the North American natural gas market," Energy Economics, Elsevier, vol. 27(4), pages 639-665, July.
  3. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1995. "Effects of Liberalizing the Natural Gas Markets in Western Europe," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 85-112.
  4. Patrick Cayrade, 2004. "Investments in Gas Pipelines and Liquefied Natural Gas Infrastructure. What is the Impact on the Security of Supply?," Working Papers 2004.114, Fondazione Eni Enrico Mattei.
  5. Egging, Rudolf G. & Gabriel, Steven A., 2006. "Examining market power in the European natural gas market," Energy Policy, Elsevier, vol. 34(17), pages 2762-2778, November.
  6. Gijsbert Zwart & Machiel Mulder, 2006. "NATGAS: a model of the European natural gas market," CPB Memorandum 144, CPB Netherlands Bureau for Economic Policy Analysis.
  7. Holz, Franziska & von Hirschhausen, Christian & Kemfert, Claudia, 2008. "A strategic model of European gas supply (GASMOD)," Energy Economics, Elsevier, vol. 30(3), pages 766-788, May.
  8. Aune,F.R. & Golombek,R. & Kittelsen,S.A.C. & ..., 2001. "Liberalising the energy markets of Western Europe : a computable equilibrium model approach," Memorandum 14/2001, Oslo University, Department of Economics.
  9. Gabriel, Steven A. & Vikas, Shree & Ribar, David M., 2000. "Measuring the influence of Canadian carbon stabilization programs on natural gas exports to the United States via a 'bottom-up' intertemporal spatial price equilibrium model," Energy Economics, Elsevier, vol. 22(5), pages 497-525, October.
  10. SMEERS, Yves & WEI, Jing-Yuan, 1997. "Do we need a power exchange if there are enough power marketers ?," CORE Discussion Papers 1997060, Universit├ę catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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