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Stochastic Mixed-Integer Programming for Integrated Portfolio Planning in the LNG Supply Chain

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  • Adrian Werner
  • Kristin Tolstad Uggen
  • Marte Fodstad
  • Arnt-Gunnar Lium
  • Ruud Egging

Abstract

We present a new model to support strategic planning by actors in the liquefied natural gas market. The model takes an integrated portfolio perspective and addresses uncertainty in future prices. Decision variables include investments and disinvestments in infrastructure and vessels, chartering of vessels, the timing of contracts, and spot market trades. The model accounts for various contract types and vessels, and it addresses losses. The underlying mathematical model is a multistage stochastic mixed-integer linear problem. Industry-motivated numerical cases are discussed as benchmarks for the potential increases in profits that can be obtained by using the model for decision support. These examples illustrate how a portfolio perspective leads to decisions different than those obtained using the traditional net present value approach. We show how explicitly considering uncertainty affects investment and contracting decisions, leading to higher profits and better utilization of capacity. In addition, model run times are competitive with current business practices of manual planning.

Suggested Citation

  • Adrian Werner & Kristin Tolstad Uggen & Marte Fodstad & Arnt-Gunnar Lium & Ruud Egging, 2014. "Stochastic Mixed-Integer Programming for Integrated Portfolio Planning in the LNG Supply Chain," The Energy Journal, , vol. 35(1), pages 79-98, January.
    • Handle: RePEc:sae:enejou:v:35:y:2014:i:1:p:79-98
    DOI: 10.5547/01956574.35.1.5
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    Cited by:

    1. Sara Al-Haidous & Tareq Al-Ansari, 2019. "Sustainable Liquefied Natural Gas Supply Chain Management: A Review of Quantitative Models," Sustainability, MDPI, vol. 12(1), pages 1-23, December.
    2. Hauser, Philipp, 2021. "Does ‘more’ equal ‘better’? – Analyzing the impact of diversification strategies on infrastructure in the European gas market," Energy Policy, Elsevier, vol. 153(C).
    3. Becerra-Fernandez, Mauricio & Cosenz, Federico & Dyner, Isaac, 2020. "Modeling the natural gas supply chain for sustainable growth policy," Energy, Elsevier, vol. 205(C).

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