G2M2™: A New Model of the Global Market for Natural Gas 33 rd USAEE North American Conference...

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G2M2™: A New Model of the Global Market for Natural Gas

33rd USAEE North American Conference

Pittsburgh, PAOctober 26, 2015

Dr. Robert BrooksFounder

RBAC, Inc.© 2015, RBAC, Inc. All Rights Reserved.

(c) 2015, RBAC, Inc. All Rights Reserved. 2

Presentation Overview• Global Market Overview– What is changing in the global market for natural gas?– Who are the key players?– Who are the challengers?– What are the target markets?

• G2M2: The Global Gas Market Model– What was the development strategy?– What economic principles are used?– What is its scope?– How was it constructed?– How is it used?– What does it predict?

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What is changing in global gas?

• The dynamics of natural gas and LNG are going through a major shift

– The market position of incumbents is eroding

– New challengers have arisen

– Prized markets have suddenly become uncertain

© 2015, RBAC, Inc. All Rights Reserved.


The Incumbents• Pipeline Gas– Russia– Norway– Turkmenistan– Algeria

• LNG– The Middle East– North and West Africa– Malaysia, Indonesia, and Australia


The Challengers• Pipeline Gas– Russia – to Asia?– Azerbaijan – to Europe?– Turkmenistan – to Europe?– Iraq – to Turkey? Europe?– Iran – to South Asia? Europe?

• LNG– Australia (major new projects)– North America (USA and Canada)– East Africa (Mozambique, Tanzania)


What’s the Prize?• Market growth in Asia– China– India– Pakistan– Southeast Asia

• Market share in Europe• New growth markets– Africa– The Middle East– South America


How will this game turn out?

• Vast sums are being spent to create the energy world of the upcoming decades

• Incumbent positions are not guaranteed • Challengers are poised to fight for existing and

newly forming markets• Robust evaluation of investment proposals

and opportunities is a must!– That is what G2M2 is designed to help you do

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G2M2 Development Strategy• Experienced and knowledgeable team– RBAC, Inc.

• Model design, development, and testing• Database design• System integration

– Navigant Consulting, Inc. • Model requirements specification• Identification of key market factors• Data compilation, evaluation, and integration• Reality check: do model results make real market sense?

• Use workable principles from prior successes– GPCM North American Natural Gas Modeling System



G2M2 Economic Model• Version 1.0: Competitive market approximation– Enhanced Spatial Equilibrium Model (Samuelson)– Non-linear supply, demand, and transport curves– LNG contracts modeled as take-or-pay with limited-

flexibility delivery schedules– Approximations permit LP or QP solution

• Version 2.0: Mixed market model using MCP– First, reformulate model using KKT conditions– Then, replace complementarity conditions for entities

with ability to exert market power– Use PATH solver in place of Gurobi (LP/QP/MIP)

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G2M2 Scope• Monthly time frame: permits modeling of seasonality• Scenario forecast horizon: from now to 2050

– Can “back-cast” from 2006 to now• Coverage: more than 100 countries represented

– All natural gas producing and /or consuming countries– All LNG exporting and / or importing countries– Large markets divided into sub-country areas

• USA -> Census Regions• Canada, Mexico, Russia -> East and West

• Nearly 400 gas pipelines: existing and proposed• Multiple LNG tankers classes

– Q-Max, Q-Flex, conventional grouped by size© 2015, RBAC, Inc. All Rights Reserved.

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G2M2 Data Sources• International Group of Liquefied Natural Gas Imports (GIIGNL)• International Gas Union (IGU)• Gas Infrastructure Europe (GIE)• U.S. Energy Information Agency (EIA)• U.S. Federal Energy Regulatory Commission (FERC)• U.S. Department of Energy (DOE)• Canada National Energy Board (NEB)• LNG Journal• LNG Company websites• Panama Canal Authority (ACP)• Suez Canal Authority (SCA)• Timera Energy• BP Statistical Review 2007-2014• International Energy Agency (IEA) • Joint Organizations Data Initiative (JODI)• European Network of Transmission System Operators for Gas (ENTSOG)• East European Gas Analysis (EEGA)• Gazprom and other company websites© 2015, RBAC, Inc. All Rights Reserved.


G2M2 Model Design Methodology• Construct the conceptual design

– Simple node, arc network models• Write the model using AMPL modeling language

– Supply and demand equations– Gas flow: node balance equations (spatial / temporal), pipeline inputs,

flows, outputs– LNG flow: production, shipping (spot/contract), transportation cost

functions, regasification• Programmatically create the application

– Create the required I/O tables in a relational database– Create the user interface for the application– Create test problems to debug the model

• Test and iterate – Run test problems and examine the results– Modify AMPL code, re-create application, run tests, and analyze results

until the model is working exactly as desired

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G2M2 Intra-Country Model


Consumption

Gas Storage LNG Storage

Gas Production

Injection

Withdrawal Liquefaction

Re-gas

Pipeline Imports

LNG Exports

LNG Imports

Pipeline Exports

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G2M2 Inter-GPU Pipeline Model


2

Pipe A deliveries to GPU 2

Segment 1 (Pipe A)


4

1

Pipe A receipts from GPU 1

3


Pipe Link 1-2

Pipe Link 2-3

Pipe Link 2-4

Segment 2 (Pipe A)

Segment 3 (Pipe A)

Segment 4 (Pipe A)

NSegment N

(Pipe B)

Pipe Intx

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G2M2 LNG Flow Model


Liquefaction / Export Region

(GPU 1)

Import Region (GPU

3)

Import Region (GPU 2)

LNG Tanker Shipment

from 1 to 2

LNG Tanker Shipment

from 1 to 3

1

2

3

LNG Tanker diversion

from 3 to 2

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LNG Transport Cost Model


0 0.050.10.150.20.250.30.350.40.450.50.550.60.650.70.750.80.850.90.95 10.001.002.003.004.005.006.007.008.009.00

10.0011.0012.00

Day Rate is function of tanker utilization: A + B * U / (1 - U)

Example shows day rate multiplier for A = 1, B = 0.5


Example AMPL Code# balance equations in each segment (gpu) of the pipeline# gpu = geo-political unit (a country or sub-division of a country)

# deliveries out of a pipeline segment in a gpu: 1. Deliveries to the gpu2. Deliveries to gpu’s at cross-border points on the same pipeline3. Deliveries to other pipelines in the gpu or at cross-border points

pipesegmentuse_dlvyprice{(pipeline,gpu,t) in PIPESEGMENT}: pipesegmentuse_qty[pipeline,gpu,t] =sum{(pipeline,dest,t) in PIPEDEM:dest=gpu} pipedelivs_qty[pipeline,gpu,t] + sum{(pipeline,gpu,dest,t) in PIPELINK} pipelinkuse_qty[pipeline,gpu,dest,t] +sum{(pipeline,gpu,topipe,dest,t) in PIPEINT} pipeintuse_qty[pipeline,gpu,topipe,dest,t];


Generated Database Tables and Relations


Generated User Interface


Generated Test Problems

• Geographical entities (gpu’s)• Gas supply curves• Gas demand curves• LNG production capacities and costs• LNG re-gas capacities and costs• Tanker classes and inventories• Tanker day rates, fuel use, fuel cost, etc.• Maritime distances between gpu’s


G2M2 Tabular Reports


G2M2 Graphical Reports

26© 2015, RBAC, Inc. All Rights Reserved.

• Scenario DesignForecasting potential impacts of various conditions and events on gas and LNG production, transportation, pricing and demand– Growing shale gas production in new plays and countries– Proposed new gas pipelines or expansions of existing ones– New or expanded LNG import & export terminals– Demand sensitivity to weather and gas price– Effect of economic growth changes on demand– Effect of governmental policies

• Scenario Evaluation– Built-in reports– Portal to Excel

How is G2M2 used?


• Natural gas production: where and how fast will it grow?

• World gas prices: will they converge? if so, when?

• LNG market share: how will LNG fare against pipeline gas?

• North American LNG: can the US and Canada compete?

• New capacity: LNG liquefaction, re-gas, and tankers; new gas pipelines: how much is needed to satisfy future market growth?

What issues can G2M2 address?


Where will gas production grow?

20112014

20172020

20232026

20292032

20352038

20412044

20472050

100

200

300

400

500

Gas Production by Region (bcf/day)

North AmericaMiddle EastLatin AmericaFormer Soviet UnionEuropeAsia PacificAfrica


Will global gas prices converge?


How much market share for LNG?


Can North America compete?

20152017

20192021

20232025

20272029

20312033

20352037

20392041

20432045

20472049

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

200,000,000

Europe

Asia Pacific

North American LNG Shipment Volumes (M3)


What new capacity will be needed?

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 20250%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%LNG Tanker Utilization


Thank you!

Questions?


RBAC Contact Information• Founder and President

– Robert Brooks, PhD: [email protected]• Contracts & Administration

– Liam Leahy, CEO: [email protected] (818-216-9356)• Technical Management

– Bethel King, Dir. Market Analysis: [email protected] – Alan Morrissett, Dir. Software Design: [email protected]– Aaron Brooks, Mgr. Technical Support: [email protected]

• Sales– James Brooks, Dir. Business Development: [email protected]

• Contact Information: – RBAC, Inc.– 14930 Ventura Blvd, Suite 210– Sherman Oaks CA 91403– Sales & Administration: 818-784-5400– Technical Information and Support: 818-501-7300

• More information: http://www.rbac.com

mailto:[email protected]






http://www.rbac.com/

G2M2™: A New Model of the Global Market for Natural Gas 33 rd USAEE North American Conference...

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