Modeling Investment Decisions in Gas Pipeline Networks: A Game-theoretic Mixed Complementarity Problem Formulation and its Application to the Chinese Gas Market

Rapidly growing natural gas demand in China has formed a precondition to investigate the potential of several pipelines from Russia and other CIS countries, which could possibly head their flows to the Chinese natural gas market. The variety of proposed projects and the difference in their characteristics results in competition and, therefore, in order to assess the projects. economic perspectives a game-theoretic approach is used. A two-step procedure for the problem's game-theoretic formulation is proposed. In the instantaneous supply game the players have the possibility to supply natural gas to the market. Each player determines his or her supply levels in such a way that profits are maximized, taking into account the supplies of all other players. In the game of timing the players have to decide when to construct their pipelines. Due to the growing demand for natural gas, the time of entering the market plays an important role. The players seek to maximize the net present value of their investment by choosing the pipelines. start of commercial operation from a discrete set of years. The equilibria obtained from the supply game are used to calculate the payoff matrices for each pipeline in the timing game. Both games are formulated and implemented as mixed complementarity problems which allows the analysis of the competition of up to 5 pipeline projects simultaneously. Results for the Chinese natural gas market are presented and discussed with an emphasis on sensitivity analysis

Modelling competition between natural gas pipeline projects to China

China's natural gas demand is expected to grow rapidly in the coming decades. Therefore the potential of several pipelines from Russia and other CIS countries to China has been investigated. A two-step game-theoretic procedure for the problem formulation is proposed to assess the projects' economic perspectives. In the instantaneous supply game the players determine optimal supply levels to the market. Based on these results the players decide in the game of timing when to construct their pipelines. Results indicate that a number of proposed pipelines are competitive under the assumptions made and could enter the market within the coming decade

Global long-term energy-economy-environment scenarios with an emphasis on Russia

This paper describes two research projects carried out by the International Institute for Applied Systems Analysis (IIASA) within the framework of IIASA Environmentally Compatible Energy Strategies (ECS) Program and IIASA's Dynamic Systems (DYN) Program in collaboration with leading groups in Russia. One project aims at elucidating Russia's opportunities and prospects stemming from participation in the Kyoto Protocol. The main results of this simulation-based study are that under a wide range of plausible assumptions concerning its economic development and its estimated energy supply, Russia's participation in the Kyoto protocol may hold the promise of economic and environmental benefits. The second project concerns the outlooks for the Russian natural gas sector. The MERGE global model, i.e., one of the most well-known and extensively used E3 models, is used in the study pertinent to the first project. The GASCOM dynamic optimization shell is used for research efforts within the second project aimed at optimization of investments into the gas lines. Although both projects are in their early phases, a set of relevant results have been obtained already

Game of timing in gas pipeline projects competition: simulation software and generalized equilibrium solutions

Many models of energy market development and decision-making processes take into account the competition between energy suppliers, and the theory of games is an appropriate tool to study these problems. This chapter is devoted to numerical analysis and modification of the game-theoretical gas market model developed by Klaassen, Kryazhimskii, and Tarasyev. We describe a software G-TIME elaborated for this purpose and the results of a simulation and sensitivity analysis on the data of the Turkish gas market. The last section deals with the notion of a generalized Nash equilibrium, which seems to be useful for taking risk and uncertainty into account. The research is based on approaches and methods developed in [1–10]

Computer Analysis of the Sensitivity of the Integrated Assessment Model MERGE-5I

This paper reports on an application of a large-scale non-linear optimization model to the analysis of environmental problems. The authors present first results of the initial stage of the study, a sensitivity analysis of the model's input parameters. This analysis is part of the more comprehensive study Analysis of Economic Implications of Russia's Participation in the Kyoto Protocol, undertaken by a collaborative group of researchers from IIASA and Russian research institutes