Optimization Framework for Natural Gas Storage Assets Subject to Price Uncertainty

Abstract

Natural gas offers a clean and efficient fuel-burning method of power generation and heating. North America, specifically, features a sprawling network of natural gas pipelines and storage facilities that bring natural gas (NG) from source to customer. Like many commodities (oil, electricity, etc.), the price of NG is subject to uncertainty. Natural gas storage assets can allow marketing companies to make money by injecting or withdrawing gas at opportune moments. Even simple contracts; however, involve large numbers of decisions and constraints that must be considered. Furthermore, because of the financial nature of storage decisions, it is desirable to measure or include risk in the decision-making process. This work presents optimization framework that serves as a decision support tool for natural gas storage assets. Mixed-integer-programming models are presented for two types of storage decisions: forward and cash. Model framework includes constraints that consider the impact of asset inventory on injection and withdrawal rates. Including said constraints is found to be essential in determining feasible injection and withdrawal decisions when assets are subject to inventory ratcheting. For both cash and forward decisions, Stochastic, Robust and Distributionally Robust Optimization alternatives are presented to account for risk. Parameterization of the risk-management alternatives allows for a user to obtain tactical plans for storage assets while considering varying levels of risk tolerance and averseness.