A strategic model of European gas supply (GASMOD)

Abstract

Abstract:Structural changes in the European natural gas market such as liberalization, increasing demand, and growing import dependency have triggered new attempts to model this market accurately. This paper presents a model of the European natural gas supply, GASMOD, which is structured as a two-stagegame of successive natural gas exports to Europe (upstream market) and wholesale trade within Europe (downstream market), and which explicitly includes infrastructure capacities. We compare three possible market scenarios: Cournot competition on both markets, perfect competition on both markets, and perfect competition on the downstream with Cournot competition on the upstream market. We find that Cournot competition on both markets is the most realistic representation of today's European natural gas market, where suppliers at both stages generate a mark-up at the expense of the final customer (double marginalization). Our results yield a diversified supply portfolio with newly emerging (LNG) exporters gaining market shares. Enforcing perfect competition on the European downstream market would in positive welfare effects. The limited infrastructure strongly influences the results, and we identify bottlenecks mainly for intra-European trade relations whereas transport capacity on the upstream market is sufficient (with the exception of Norwegian exports) in the Cournot scenario. Zusammenfassung:Der

A complementarity model for the European natural gas market

“…The Paci…c and the Atlantic basins would mainly be supplied by exporters located in the same basin, with the Middle East providing swing supplies between the two basins. These results di¤er signi…cantly from regional models of the European market which do not take into account demand for LNG in other world regions.In [38], for example, the authors …nd a larger diversity of European imports from all possible LNG sources and no cuto¤ of some sources.…”

“…While complementarity models of natural gas markets have been formulated and developed with real or realistic data before, e.g., [13], [37], [34], [1], [26], [29], [4], [50], [38], the one presented in this paper distinguishes itself by its level of detail relative to the number and variety of players, the number of seasons (three seasons: low demand, high demand, and peak), as well as the number of countries modeled (52). In this respect, the model we present is approaching the level of detail of the Rice University World Gas Trade model [36], or the Gas Systems Analysis Model (GSAM) for North America ( [28], [27]).…”

“…Hence, we model the regasi…ers as being active in every season. They are the downstream interface with the lique…ers and are a new player compared to previous models ( [26], [29], [4], [13], [38]). Modeling both types of players allows us to represent the entire LNG value chain, with the LNG tankers activity represented by the arcs between the lique…ers and the regasi…ers.…”

Analysis of the World Market for Steam Coal Using a Complementarity Model

“…These trading firms are very effective and via their mine ownership Japanese traders and customers have good insight into the mining costs. 10 …”

“…Given the spatial character of the market and our earlier expertise on Cournot modeling of natural gas market (e.g. Holz et al [10] and Egging et al [3]) we concentrate on a spatial Cournot model. A general formulation of how the Takayama-Judge spatial equilibrium model can collapse into a spatial Cournot model can be found in the paper by Yang, Hwang and Sohng [22].…”