Evaluating the Benefits of LNG Procurement through Spot Market Purchase
01 Jan 2019-Vol. 46, pp 1723-1728
TL;DR: In this paper, a mixed-integer linear programming (MILP) model was used to compare the cost of transportation through long term contracts as against spot market purchase. And the results showed that, in every case, spot market purchasing is better compared to long term contract.
Abstract: Natural gas (NG) is liquefied for shipping and storage purposes, this gas in liquid state is known as liquefied natural gas (LNG). The trade of LNG is usually regulated by contracts between suppliers and buyers. Historically long term contracts covering 20-25 years have been used; but more recently, due to emergence of new suppliers and consumers spot market purchases of LNG has also become possible. Nowadays, a consumer can opt to procure LNG via long term contracts or from spot market purchase or a combination of the two. We seek to evaluate the relative benefits of long term versus spot purchases. As a first step, in this paper, we report a mixed-integer linear programming (MILP) model to compare the cost of transportation through long term contracts as against spot market purchase. Several examples are solved; the results show that, in every case, spot market purchase is better compared to long term contracts.
Citations
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TL;DR: Wang et al. as mentioned in this paper explored the value of long-term LNG contracts in the process of natural gas market globalization, and applied China's LNG trade data in 2018 to the model.
Abstract: With the rapid development of short-term and spot trade of liquefied natural gas (LNG), the natural gas market is gradually evolving from regionalization to globalization. At the same time, the existence and rationality of long-term LNG contracts have become increasingly controversial. To explore the value of long-term LNG contracts in the process of natural gas market globalization, this article constructs a two-stage game model and applies China’s LNG trade data in 2018 to the model. The study shows that, compared with complete import of short-term LNG, even if the long-term LNG contracts do not have price advantages, importing an appropriate amount of long-term LNG may help to increase the total LNG imports, reduce the price of LNG, and thus improve import benefits. Besides, a moderate amount of long-term LNG contracts is conducive to the establishment of a stable and flexible natural gas supply system and the security of natural gas imports. Therefore, natural gas importers should not underestimate or even ignore the value of long-term LNG contracts while actively participating in short-term and spot trade of natural gas.
References
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TL;DR: In this article, the authors present an overview on the characteristics of LNG, present state of affairs, its import from overseas, CNG vs. LNG as an automobile fuel, eco-friendliness of natural gas fuel, etc.
Abstract: As the demand of natural gas has sharply increased in the last two decades at the global level, the transportation of natural gas from different parts (gas producing to the consuming areas) of the world has become more significant. Liquefaction of natural gas provides a safer and economical alternative for transportation and also increases its storage capabilities. The liquefaction process requires the natural gas to be cooled using various methods of cryogenic processes and also be depressurized to atmospheric conditions for easier and safer storage. LNG transported in cryogenic vessels offers several advantages over pipeline transport of natural gas especially when the gas consuming areas are far away from the gas producing areas. Moreover, LNG as an automobile fuel has a definite edge over other fuels. This article presents an overview on the characteristics of LNG, present state of affairs of LNG, its import from overseas, CNG vs. LNG as an automobile fuel, eco-friendliness of natural gas fuel, etc. It also discusses the potential of natural gas production from different sources.
333 citations
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TL;DR: In this paper, the authors evaluated the potential use of LNG for direct storage of cold and indirect storage of power, based on the review of existing information, and they showed that the overall efficiency of using LNG to operate energy storage depends very much on the technologies involved and on the overall capacity of a particular technology.
Abstract: The world trade volume of Liquefied Natural Gas (LNG) is increasing year by year. Unlike gaseous natural gas (NG), which is transported through a fixed network of pipelines, LNG offers more flexibility to both the exporters and the importers as it can be transported between any pair of exporting and receiving LNG terminals. The LNG process, consisting of liquefaction, transportation, storage, and regasification of LNG, is accompanied by certain energy demands. The paper focuses on the evaluation of the chain of energy transformations involved in the LNG process. Based on the review of existing information, the entire process is evaluated from the view of the potential use of LNG for direct storage of cold and indirect storage of power. The analysis of the existing data shows that the overall efficiency of using LNG for operative energy storage depends very much on the technologies involved and on the overall capacity of the particular technology. The combination of energy-efficient liquefaction technologies and regasification technologies with energy recovery makes it possible to employ LNG as an energy storage medium even when transported over large distances.
51 citations
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TL;DR: This paper develops a novel multi-grid continuous-time mixed-integer linear programming (MILP) formulation based model that allows limited jetties at each site, non-zero transfer times, variable load/unload quantities, transfer task sequencing, etc.
Abstract: Many multinational chemical companies (MNCs) manage the inventories of several raw materials at their worldwide sites. Maritime transportation plays a key role in this chemical logistics. In this paper, we address an inventory service problem in which a chemical MNC uses a fleet of multi-parcel ships with dedicated compartments to move multiple chemicals continually among its internal and external production and consumption sites. The objective is to ensure continuity of operation at all sites by maintaining adequate inventory levels of all raw materials. We develop a novel multi-grid continuous-time mixed-integer linear programming (MILP) formulation based (Susarla, Li, & Karimi, 2010) for this chemical logistics problem. Our model allows limited jetties at each site, non-zero transfer times, variable load/unload quantities, transfer task sequencing, etc. In contrast to the literature, it needs no separate estimates for arrivals at each site. Several examples are solved to illustrate the efficiency of our proposed formulation.
32 citations
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TL;DR: In this paper, the development of a low-cost and high-capacity liquefied natural gas (LNG) pipeline is discussed. But the pipeline is not considered in this paper.
Abstract: Recent increases in energy prices, the rise in natural gas demand due to the concerns over CO2 emissions and a possible carbon tax, the development of a low-cost and high-capacity liquefied natural...
29 citations
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TL;DR: In this paper, the development of LNG plants as megaprojects is also expected to rise and interest in clean energy has led to increased international demand for liquefied natural gas (LNG).
Abstract: Interest in clean energy has led to increased international demand for liquefied natural gas (LNG), and the development of LNG plants as megaprojects is also expected to rise. In these mega...
17 citations
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