Spot sale of uncommitted LNG from Middle East: Japan or the UK?
File(s)
Author(s)
Nikhalat-Jahromi, Hamed
Bell, Michael GH
Fontes, Dalila BMM
Cochrane, Robert A
Angeloudis, Panagiotis
Type
Journal Article
Abstract
The importance of liquefied natural gas (LNG) is rising as demand for it grows rapidly and steadily due to growth in energy demand, the transition to a low carbon economy and the longer distances over which natural gas is now traded. Given its importance, this work proposes an optimization model that assists to decide on when and where LNG should be delivered by coordinating tanker type, assignment and routing, inventory management, contract obligations, arbitrage and uncommitted LNG. The model maximizes the profit mainly by taking advantage of price differences between different markets. The contributions of this work are twofold. First, following the analysis of expenses and revenues, a new mixed integer programming model for LNG liquefaction and shipping is proposed from a corporate finance perspective. Furthermore, a solution approach for it is implemented and tested. Second, the model is used to derive a short term trade policy for the Middle Eastern LNG producers regarding the spot sale of their uncommitted product to Japan or to the UK, namely to: dispatch to whichever market has the higher current spot price, regardless of the variability of the transport expenses.
Date Issued
2016-09
Date Acceptance
2016-06-16
Citation
Energy Policy, 2016, 96, pp.717-725
ISSN
1873-6777
Publisher
Elsevier
Start Page
717
End Page
725
Journal / Book Title
Energy Policy
Volume
96
Copyright Statement
© 2016 Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Subjects
Science & Technology
Technology
Life Sciences & Biomedicine
Energy & Fuels
Environmental Sciences
Environmental Studies
Environmental Sciences & Ecology
LNG
Operational planning
EBITDA
Inventory routing problem
Spot sale
Energy
MD Multidisciplinary
Publication Status
Published
Date Publish Online
2016-07-14