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Energy Infrastructures Modeling:
Gas Pipelines System in Gas Pipelines System in EurasiaEurasia
Arkadii KryazhimskyArkadii Kryazhimsky
Oleg NikonovOleg Nikonov
Yaroslav MinullinYaroslav Minullin
2
Russian NMO*-SponsoredEnergy Group
Oleg Nikonov, Yaroslav MinullinOleg Nikonov, Yaroslav Minullin
Urals State Technical UniversityUrals State Technical University
Yurii Kononov, Dmitry KononovYurii Kononov, Dmitry Kononov
Energy Institute of Siberian Branch of RASEnergy Institute of Siberian Branch of RAS
Olga GolovinaOlga Golovina
Moscow State UniversityMoscow State University
** NMO – National Members Organization NMO – National Members Organization
3
Contents
Research HistoryResearch History Turkey’s Gas MarketTurkey’s Gas Market China’s Gas MarketChina’s Gas Market Supply GameSupply Game Game of TimingGame of Timing ConclusionConclusion
4
Research History
2000 – Great Caspian Pipeline 2000 – Great Caspian Pipeline Game, IGOR modelGame, IGOR model
2001 – Game of Timing (G-TIME) 2001 – Game of Timing (G-TIME) modelmodel
2002 – G-TIME China model2002 – G-TIME China model
5
Four-level Dynamic Optimization
Assessment of the market Assessment of the market potential innovationpotential innovation
Selection of innovation scenarios Selection of innovation scenarios Regulation of the future supplyRegulation of the future supply Optimization of theOptimization of the current current
investments investments
6
Turkey’s Gas Market
Blue StreamBlue Stream
BulgarpipeBulgarpipe
EkarumEkarum
TranscaspianTranscaspian
7
Turkey’s Gas Market
From country
Name Startyear
Partfinish
edin
1998(%)
Capacity
(bcm/
year)
Length
(miles)
Invest-
ment(billio
n US$)
O&M costs(US$/1000 cm)
Distri-
bution
Costs($/
1000 cm)
Transit-fees((US$/
1000 cm)Turkmeni
stanTrans-caspian
2002 0 31.15
1696 2-3 8 33 16.9
Iran Iranpipe 2010 58 28 2400 3.9-4.1
30 33 0
Turkmenistan
Ekarum 2009 54 28.3 2172 3.8-4 30 33 21.6
Russia Blue stream
2002 0 14.16
1220 4-6 14.1 33 0
Russia Bulgar-pipe
exists
100 10.2 3500 Exists
30 33 10
8
IGOR Model
Gas field 1(overall costs of delivering gas to
the market)
Gas field 1(overall costs of delivering gas to
the market)
Gas marketGas market
Price of gas
GDP
Price elasticity of
demand
GDP elasticity of
demand
Investment into pipeline 1
Investment into pipeline 1
Investment into pipeline N
Investment into pipeline N
Investment into pipeline 2
Investment into pipeline 2
Gas field 2(overall costs of delivering gas to
the market)
Gas field 2(overall costs of delivering gas to
the market)
Gas field N(overall costs of delivering gas to
the market)
Gas field N(overall costs of delivering gas to
the market)
supply supply supply
9
IGOR Model
Trans-Balcan
Iranpipe
EkarumBlue Stream
TranscaspianLNG
10
IGOR Model
Trans-Balcan
Iranpipe
EkarumBlue Stream
Transcaspian
11
G-TIME Model
ai t( )
bi1 t( )
bi2 t( )
t- t+ t
12
G-TIME Model
13
China’s Gas Market
14
China’s Energy SectorSpecific Features
Not quite market conditionsNot quite market conditions Lack of econometric dataLack of econometric data Low correlation between GDP and Low correlation between GDP and
sector’s incomessector’s incomes
15
Price formation
16
Gas Market Model
deposit 1deposit 1 project 1project 1
extractionextraction
transportationtransportation
deposit 2deposit 2project 2project 2
extractionextraction
transportationtransportation
natural gas marketnatural gas market
supplysupply
priceprice
p=p(dp=p(d00,p,p00,e,epp,y),y)
liquidliquidnaturalnatural
gas (LNG)gas (LNG)priceprice
forecastedforecasteddemanddemand
forecastedforecastedpriceprice
forecastedforecastedprice elasticityprice elasticity
17
Supply Game (a player occupies market solely)
ymin Mi d0
maximal payoff
yi
i
i max t - fixed
At each instant of time the player maximizes his payoff:At each instant of time the player maximizes his payoff:
ii(y,y(y,yii) ) max max yyiiDD
and gets an optimal value for supplyand gets an optimal value for supply
D
ii(y,y(y,yii)= [p(d)= [p(d00,p,p00,e,epp,y)-c(y,y)-c(yii)]y)]yii
18
M1
M2
y1
y2
ymin
d0
best response y2 (y1)
best response y1 (y2)
Nash equilibrium point (y1 (y2) ; y2 (y1))
Supply Game (both players are on the market)
D
19
Supply Game
20
Supply Game in time
t
yi
Mi
yi2(t)
yi1(t)
d0(t)
ymin(t)
Each player gets an optimal supply plan in time:Each player gets an optimal supply plan in time:
yyi1i1(t) and y(t) and yi2i2(t)(t)
21
Supply Game benefits
Substituting optimal supply the player gets:Substituting optimal supply the player gets: upper benefit rate, bupper benefit rate, bi1i1(t) =(t) = ii(t,y(t),y(t,y(t),yi1i1(t))(t))
and lower benefit rate, band lower benefit rate, bi2i2(t) =(t) = ii(t,y(t),y(t,y(t),yi2i2(t))(t))
t, t-i
bi1(t)bi2(t)
t-i
Bi(t,t-i)
upper benefit rate, bi1(t)
lower benefit rate, bi2(t)
22
ti0
ti
return of investments
tiROI
Pi(t)
t, ti
Game of Timing
tt11ROI ROI (t(t11
00 ,, tt22
00) – t) – t00 min min tt11
00
tt22ROI ROI (t(t22
00 ,, tt11
00) –t) –t00 min min tt22
00
Nash equilibrium point of starting construction times :Nash equilibrium point of starting construction times :
(t(t**11
00 ; t; t**
2200))
start of operation
start of making investments
Ci
23
Simulations
Player Player no.no.
TitleTitle Length, Length, km.km.
ExpecteExpected year d year to startto start
Marginal Marginal capacitycapacity
, , bcm/yeabcm/yea
rr
Capital Capital investinvest--ments, ments,
bln USD.bln USD.
Fixed Fixed costs, costs, USD/USD/
1000m1000m33//
yearyear
Variable Variable costs,costs,
USD/USD/10010000mm33
11 IrkutskIrkutsk 30003000 20092009 3030 66 55.855.8 5757
22SakhaliSakhali
nn21502150 20092009 1515 33 6868 6060
24
Natural Gas Demand Forecast:Base case
0
20
40
60
80
100
120
140
160
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
25
Natural Gas Price and LNG Price Forecast: Base case
130135140145150155160165170175180
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
26
Gas Demand Price Elasticity Forecast: Base case
-0.8
-0.75
-0.7
-0.65
-0.6
-0.55
-0.520
0020
0220
0420
0620
0820
1020
1220
1420
1620
1820
2020
2220
2420
2620
2820
30
27
Results of Simulations base case
0
5
10
15
20
25
30
35
0 10 20 30 40
Best 2 -> 1
Best 1-> 2
28
Results of Simulations base case
-7000
-6000
-5000
-4000
-3000
-2000
-1000
0
1000
2000
4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34
Irkutsk Sakhalin
TitleTitle Start of Start of constructionconstruction
Commercia-Commercia-lizationlization
Return of Return of investmentsinvestments
IrkutskIrkutsk 20042004 20072007 20252025
SakhalinSakhalin 20062006 20092009 20252025
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