Integrated Distributed Dynamic Simulation of the LNG Value Chain

Cameron, David B.; Skjerven, Ø.; Hyllseth, Morten; MannsåKer, P.

doi:10.1205/cherd.04372

Cited by 8 publications

(6 citation statements)

References 1 publication

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“…A simulation model for the LNG chain was developed by Cameron et al (2005). The focus was on modelling the dynamics of the LNG business for the purpose of supply chain management.…”

Section: Literature Reviewmentioning

confidence: 99%

A stochastic optimisation framework for analysing economic returns and risk distribution in the LNG business

Furlonge

2011

International Journal of Energy Sector Management

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Purpose -The liquefied natural gas (LNG) business comprises a number of economic activities with inherent risks. The purpose of this paper is to propose an integrated modelling approach, as part of the investment decision-making process, for optimising economic returns from LNG whilst taking into account uncertainty in various key input parameters. Design/methodology/approach -Inter-linked cash flow and pricing models of the LNG chain were constructed. Net present value was maximised based on selection of netback pricing variables and level of investment shareholding. Constraints were placed on the minimum acceptable returns. The risk affinity of the decision maker was captured in the form of a chance-constrained optimisation problem. A genetic algorithm was applied for numerical optimisation, in combination with Monte Carlo simulations to account for the stochastic nature of the problem. Findings -Based on the results of a case study, the deterministic solution, having no consideration to uncertainty, was found to be both sub-optimal and provided an unsatisfactory risk outcome. The stochastic approach yielded an optimal solution with due consideration to risk. Various scenarios show that the choice of the decision variables significantly impacts the trade-off between risk and returns along the LNG chain to government and investor.Research limitations/implications -The suitability of the methodology to the operational phase of the LNG business which incorporates different elements of risk, such as market dynamics and logistics, is as yet untested. Originality/value -This framework may be useful in the formulation of optimal commercial structure of firms, investment portfolio and gas/LNG pricing arrangements for host governments involved in the LNG business.

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“…A simulation model for the LNG chain was developed by Cameron et al (2005). The focus was on modelling the dynamics of the LNG business for the purpose of supply chain management.…”

Section: Literature Reviewmentioning

confidence: 99%

A stochastic optimisation framework for analysing economic returns and risk distribution in the LNG business

Furlonge

2011

International Journal of Energy Sector Management

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“…The LNG value chain involves five steps, as shown in Fig. 1 and explained as follows 19: Production: Natural gas is situated in distant locations where a combination of gas‐liquid hydrocarbons and water is generated from subsurface reservoirs, both onshore and offshore (today there is a rise in production from sub‐sea wells) 9. Liquefaction: The liquefaction process occurs in the cryogenic facility. These facilities are challenging to optimize due to the closely integrated nature of the process, involving numerous process recycles 20. Transportation: LNG is stored in huge insulated tanks until ready for transportation.…”

Section: Introductionmentioning

confidence: 99%

“…For short distances, pipelines offer the most affordable and dependable method of delivering significant amounts of natural gas [5,6]. Instead, for long-distance connections, such as those between continents that span major ocean bodies, transportation of gas is done in the form of LNG, which removes the need for difficult and costly pipes beneath the sea, lowering the cost to consumers [7][8][9]. In comparison to gas pipes and other technological options, handling natural gas as LNG offers greater flexiblity [1].…”

Section: Introductionmentioning

confidence: 99%

Liquefied Natural Gas Value Chain: A Comprehensive Review and Analysis

Shingan,

Banerjee,

Kumawat

et al. 2023

Chem Eng & Technol

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Over the past few decades, the liquefied natural gas (LNG) business has experienced astounding expansion and gained global relevance. LNG has emerged as a key element in meeting the world's rising energy demand while working to cut carbon emissions, since it is a cleaner and more adaptable energy source. The entire process from natural gas extraction to consumption is covered in the presented analysis of the LNG value chain, starting out by looking at the discovery and production of natural gas reserves, highlighting important innovations and methods used during the extraction stage. The procedures used to treat and purify natural gas in order to meet the strict standards for liquefaction are detailed. Analysis of the liquefaction process reveals numerous liquefaction technologies, e.g. the well‐known conventional liquefaction and the cutting‐edge floating LNG and small‐scale LNG facilities. LNG storage and transportation, as critical components in the value chain, are examined in great detail. When the LNG reaches its destination, regasification plays a crucial role in repurposing it as a gas for distribution and consumption. Regasification technologies, such as conventional onshore terminals, floating storage and regasification units, and land‐based regasification facilities, are covered. Concerns regarding methane emissions and the carbon footprint, the potential for reducing greenhouse gas emissions through new technology, the environmental impact of LNG, and the economics of LNG are also considered across its value chain.

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“…Any economic evaluation of the LNG business must take a macroscopic view to properly assess how value is distributed (Rafferty, 2001). Cameron et al (2005) developed a dynamic model for the LNG chain for the purpose of supply chain management. Neto and Sauer (2006) used decision analysis for choosing between LNG or pipeline options for a given set of values of the decisions variables.…”

Section: Introductionmentioning

confidence: 99%

Optimal Distribution of Economic Value along the LNG Chain from Government and Investor Perspectives

Furlonge

2008

Energy Exploration & Exploitation

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The LNG industry has been experiencing significant changes in recent years in terms of price volatility, market growth, supply increases and infrastructure expansion. To support these developments, LNG pricing models, ownership structures and commercial arrangements have been evolving. Given these dynamics, a study of the distribution of returns along the LNG chain is critical to the key parties involved, namely private investors and host government. This paper takes a holistic approach by developing an integrated economic model of upstream, midstream and downstream segments of the LNG chain. An optimization framework which provides for reliable investment decisionmaking is used for finding the optimal netback pricing parameters, subject to appropriate bounds being placed for instance on the minimal acceptable rates of return. A hypothetical case study with typical parameters is used to demonstrate the approach. The optimal distribution of value as well as the commercial arrangement from a government perspective is found to be significantly different from that of the investor. A simple multiobjective approach is used to identify compromise solution sets. Ownership by a state-owned energy company was also investigated in terms of optimal distribution of returns, capital allocation and commercial arrangement.

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Integrated Distributed Dynamic Simulation of the LNG Value Chain

Cited by 8 publications

References 1 publication

A stochastic optimisation framework for analysing economic returns and risk distribution in the LNG business

A stochastic optimisation framework for analysing economic returns and risk distribution in the LNG business

Liquefied Natural Gas Value Chain: A Comprehensive Review and Analysis

Optimal Distribution of Economic Value along the LNG Chain from Government and Investor Perspectives

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