4 Necessity for Storage Other commodities Natural Gas production is seasonalconsumption is relatively levelNatural Gasproduction is relatively levelShort termconsumption is seasonalResidential – WinterPower generation – Summer (lesser)Investment opportunity
16 Compare Salt Cavern with Reservoir Type Examine operational differencesIs there a financial advantage?
17 Approach Set initial parameters For a period of 1 year Gas on hand Cash on handFor a period of 1 yearGenerate daily decision to buy, hold or sellStochasticEstimate future decisionsAdjust if necessaryGas cannot exceed capacityCannot sell gas not on handCalculate change in gas and cash
18 ApproachCreate simulation with AWESIMEvaluate results
19 Model - Assumptions No holding costs No injecting/withdrawal costs Static injection/withdrawal ratesMonthly Price changes
20 Model - Parameters Injection time 45 days (V45) Volume=V Inject rate= RPrice = PCost = CInjection time 180 days (V180)Volume = 4VInject Rate = R/4