A model-based approach for the analysis of the european internal natural gas market

Abstract

During the last decade, major transformations have shaped the evolution of global natural gas markets altering the supply/demand balance. In the supply side, an ample supply due to the exploration of unconventional gas sources has brought up new producers into the market and a surge in global liquefaction capacity. Additionally, an increase in the LNG trade has favored the globalization of the natural gas market. The demand side has kept growing due to demand shocks such as the accident at Fukushima in 2011 and China clean air policies in 2017, and the continued expansion of liquefied natural gas market opening new emerging markets. These changes have highlighted the necessity for a more flexible natural gas market, which has been reflected in an increased spot market together with a tendency towards more flexible long-term contracts and new pricing mechanisms involving gas-on-gas competition. Moreover, macroeconomics and political choices have shore up this trend. In Europe, gas market fundamentals have also undergone a significant shift. This has been triggered by the aforementioned global dynamics and supported by the natural gas market liberalization and Europe’s ambitious targets of a net zero-carbon economy by 2050. In this context, the European Union is building its internal natural gas market under an entry-exit scheme, which comprises balancing zones with liquid virtual trading points, where market integration is served by appropriate levels of infrastructure. This thesis develops different optimization models in order to carry out relevant studies for the assessment of the EU internal gas market while contributing to the research field of global gas market modeling. The proposed optimization models improve current natural gas market mid-term operation tools by 1) a better consideration of natural gas long-term supply contracts; 2) including a variety of supply options (i.e. long-term supply contracts, spot market and secondary market representing wholesale markets); and 3) modeling the coexistence of oil-indexed and hub pricing mechanism. The following tools are developed for this aim: First, we develop four academic equilibrium models in order to represent the implementation and evolution of virtual natural gas hubs in Europe. Second, we advance in the natural gas modeling, by proposing a global gas model (GasValem GoG) which captures in detail all the new commercial trends (i.e. spot market vs. long-term contracts) considering different pricing options, providing insights of the mid-term natural gas market. Third, this thesis also tackles the capacity investment problem, improving the existing investment planning tools, considering sequentiality in the operation-expansion decision problem and the multiple criteria that need to be achieved simultaneously. For this aim, the GASMOPEC model is developed.