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Article Excerpt
The network for transport of natural gas on the Norwegian Continental Shell with 7,800 km of subsea pipelines, is the world's largest offshore pipeline network. The gas flowing through this network represents approximately 15 percent of European consumption, and the system has a capacity of 120 billion standard cubic meters (bcm) a year. In a network of interconnected pipelines, system effects are prevalent, and the network must be analyzed as a whole to determine the optimal operation. SINTEF has developed a decision support tool, GassOpt, which is based on a mixed-integer program, to optimize the network configuration and routing for the main Norwegian shipper of natural gas, StatoilHydro, and the independent network operator, Gassco. GassOpt allows users to graphically model their network and run optimizations to find the best solutions quickly. StatoilHydro and Gassco use it to evaluate the current network and possible network extensions. Both companies use operations research (OR) methods in the departments that are responsible for transport planning and security of supply. Several new OR projects have grown out from this cooperation. StatoilHydro estimates that its accumulated savings related to the use of GassOpt were approximately US$2 billion in the period 1995-2008.
Key words: energy; natural gas; network transportation; mixed-integer programming; decision support system.
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Natural gas is the fastest-growing energy source in OECD Europe (Energy Information Administration 2007). Norwegian gas covered 3.0 percent of the worldwide production in 2007 (BP 2008), and the Norwegian export is expected to increase by 40-50 percent within the next decade. This paper describes the development and use of a decision support tool for transport of natural gas. It gives a brief presentation of StatoilHydro and Gassco and proceeds by describing major decision problems, modeling challenges, and the tool's impact.
The Norwegian Natural Gas Supply Chain
StatoilHydro was established in 2007 with the merger of the mainly state-owned company Statoil and the petroleum business of Norsk Hydro (the Norwegian State owns 62.5 percent of StatoilHydro). Prior to the merger, both companies had been among the leading operators on the Norwegian Continental Shelf (NCS) from the early 1970s. StatoilHydro is the world's third-largest net seller of crude oil and one of the world's largest gas suppliers, as its website (http://www. statoilhydro.com) describes. StatoilHydro is the main operator and shipper on the NCS and also operates the oil and gas resources that the Norwegian government owns in full. It markets two-thirds of all Norwegian gas sold in Europe, controls a portfolio of production fields upstream in the transportation network, and determines how much gas will be produced within its share of each field. In its role as shipper, StatoilHydro buys transportation network capacity that allows it to ship gas from the fields to the markets in which it has delivery obligations or expects to find good sales opportunities.
In 2002, Gassco started operating as an independent system operator for Gassled, the gas transport network on the NCS. Figure 1 gives an overview of the NCS pipeline network.
Gassco is entirely owned by the Norwegian state. As an independent operator of the network, Gassco gives access to the gas transport network on objective, nondiscriminatory, and transparent terms. Gassco controls the capacity available in the network and administers to ensure efficient use of the resources on the NCS. In addition, Gassco's role in infrastructure growth includes the evaluation and development of alternative projects for network expansion. As a former developer of infrastructure on the NCS, StatoilHydro has technical resources and experience and serves as a technical service provider to Gassco on many NCS infrastructure projects. Gassco coordinates these projects, which involve many stakeholders, to ensure that the transport network of the future will be integrated and well run, as its website (http://www.gassco.no) describes.
The natural gas markets in this supply chain are located mainly on the European continent and in the UK, downstream of the Norwegian transport network. Historically, most natural gas has been sold on long-term contracts. These contracts typically have a structure by which buyers and sellers agree on yearly volumes, and the buyers make daily nominations within certain limits. Customers must pay for the agreed volumes whether they take them or not ("take-or-pay" contracts). In addition to volume obligations, natural gas sales are typically restricted by contractual limitations on pressure, energy content in the gas, and the proportion of contaminants, such as [CO.sub.2] and [H.sub.2]S, in the gas.
Driven mainly by the two European Union (EU) gas directives (EU Commission 1998, 2003), the gas sales from the NCS have moved from coordinated sales to company-based sales. Additional effects of liberalization are an increasing number of markets offering short-term contracts and financial derivatives, as well as increased liquidity in existing markets. This creates new business opportunities for both buyers and sellers of natural gas (Midthun 2007).
To achieve nondiscriminatory third-party access to the transport network, Gassco has established a transport market. Shippers...
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