(573g) LNG Contract Selection From Seller's Perspective

Recent increases in energy prices, the rise in natural gas demand due to the concerns over CO₂ emissions and a possible carbon tax, the development of a low-cost and high-capacity liquefied natural gas (LNG) value chain, the emergence of new suppliers with large gas reserves, the flow of uncommitted LNG capacity to the market, and the disappearance of conventional contract clauses such as destination are stimulating global LNG trade. Moreover, natural gas market liberalization is resulting in the emergence of new buyers with variable demands, which is increasing the competitiveness and dynamicity of the market. The LNG contracts are thus diversifying in price formulations, flexibility, duration, quality, quantity, commitment, discount, and other terms and conditions. Finding a combination of contracts, which trades off various cost factors in an optimal manner, is becoming more and more challenging for both buyers and sellers, where systematic optimization-based approaches can be very useful.

 Recently, Khalilpour and Karimi introduced deterministic [1] and stochastic [2] mixed-integer linear programming (MILP) formalisms to help the LNG buyers select the best combination of suppliers and contracts. This presentation will address the contract selection problem from opposite aspect, i.e. an LNG seller in the context of numerous competing sellers in the market.  

 References

 Khalilpour, R., Karimi, I.A. 2011. Selection of LNG contracts for minimizing procurement cost. Industrial & Engineering Chemistry Research. 50, 10298–10312.

1. Khalilpour, R., Karimi, I.A.  2012. Contract selection under uncertainty: LNG buyers’ perspective, Computer Aided Chemical Engineering, Volume 31, 1487-1491.