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A Complementarity Model for the European Natural Gas Market

Discussion Papers 732, 39 S.

Ruud Egging, Steven A. Gabriel, Franziska Holz, Jifang Zhuang

2007. Oct.

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Published in: Energy Policy 36 (2008), Iss. 7, 2385-2414


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.

Franziska Holz

Deputy Head of Department in the Energy, Transportation, Environment Department

JEL-Classification: C61;L95
Keywords: European natural gas market, global LNG market, mixed complementarity problem
Frei zugängliche Version: (econstor)