A Complementarity Model for the European Natural Gas Market

Rudolf Egging-Bratseth, Steven A. Gabriel, Franziska Holz and Jifang Zhuang

No 732, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In this paper, we present a detailed and comprehensive complementarity model for computing market equilibrium values in the European natural gas system. Market players include producers and their marketing arms which we call "transmitters", pipeline and storage operators, marketers, LNG liquefiers, regasifiers, tankers, and three end-use consumption sectors. The economic behavior of producers, transmitters, pipeline and storage operators, liquefiers and regasifiers is modeled via optimization problems whose Karush-Kuhn-Tucker (KKT) optimality conditions in combination with market-clearing conditions form the complementarity system. The LNG tankers, marketers and consumption sectors are modeled implicitly via appropriate cost functions, aggregate demand curves, and ex-post calculations, respectively. The model is run on several case studies that highlight its capabilities, including a simulation of a disruption of Russian supplies via Ukraine.

Keywords: European natural gas market; global LNG market; mixed complementarity problem (search for similar items in EconPapers)
JEL-codes: C61 L95 (search for similar items in EconPapers)
Pages: 39 p.
Date: 2007
New Economics Papers: this item is included in nep-cmp, nep-eec and nep-ene
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Citations: View citations in EconPapers (8)

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Journal Article: A complementarity model for the European natural gas market (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp732

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