Mitigating Supply Deficits

A Network Flow Analysis of Global Natural Gas Trade Dynamics in Response to Russian Gas Export Reductions

Josh Kirk, Evgenia Passari, Washington Ochieng, Panagiotis Angeloudis

Motivation

Increasing geopolitical tensions

Motivation

Increasing geopolitical tensions

Vulnerabilities of globalisation

Motivation

Increasing geopolitical tensions

Vulnerabilities of globalisation

Need to transition to sustainable energy sources

Motivation

Increasing geopolitical tensions

Vulnerabilities of globalisation

Need to transition to sustainable energy sources

Motivation

Increasing geopolitical tensions

Vulnerabilities of globalisation

Need to transition to sustainable energy sources

Requires a new system of trade

Motivation: LNG

$325bn of trade in 2022

Motivation: LNG

$325bn of trade in 2022

Charter rates $100k-300k per day

Motivation: LNG

$325bn of trade in 2022

Charter rates $100k-300k per day

Disruptions increase costs and reduce transport capacity

# Contributions
			
			---
			# Contributions
			
			**Method to produce monthly Natural Gas data**

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# Contributions
			
			**Method to produce monthly Natural Gas data**
			> From public data: Production, consumption, stockpiling, and trade flows

Note:
			- From public data including
				- International Energy Agency
				- Jodi Gas
				- UN
				- CEPII
			- We have prod, con...
			- Monthly data allows stockpiling
				- Captures variations throughout the year

---

# Contributions

**Method to produce monthly Natural Gas data**
			> From public data: Production, consumption, stockpiling, and trade flows

**A model of global trade for optimal commodity stockpiling**

Note:
			- Using this data we create

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# Contributions
			
			**Method to produce monthly Natural Gas data**
			> From public data: Production, consumption, stockpiling, and trade flows

**A model of global trade for optimal commodity stockpiling**
			> - Trade is represented as a graph<span style="padding-right: 200px;"></span>

Note:
			- Trade is represented as a graph with a node for all countries and a link for all pipeline and LNG trade

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			# Contributions
			
			**Method to produce monthly Natural Gas data**
			> From public data: Production, consumption, stockpiling, and trade flows

**A model of global trade for optimal commodity stockpiling**
			> - Trade is represented as a graph
			> - Solved as a Mixed-Integer Bilinear Program

Note:
			- We then formulate and solve a Mixed-Integer Bilinear Program across the network

Methodology : Data

Combined multiple sources of public data

Methodology : Data

Combined multiple sources of public data

Created a network of global Natural Gas trade

Methodology : Data

Combined multiple sources of public data

Created a network of global Natural Gas trade

Pipeline

Methodology : Data

Combined multiple sources of public data

Created a network of global Natural Gas trade

Pipeline
LNG

Methodology : Optimisation

Formulated a Non-Linear Program

Includes both trade networks

Methodology : Optimisation

Formulated a Non-Linear Program

Includes both trade networks

Linearised to a bilinear Mixed Integer Program

Using big-M constraints

$$ \begin{equation} \begin{aligned} & \text{minimise} & \text{Supply deficit} \\ & \text{subject to} & \text{Conservation of mass} \\ \end{aligned} \end{equation} $$

$$ \begin{equation} \begin{aligned} & \text{minimise} & \text{Supply deficit} \\ & \text{subject to} & \text{Conservation of mass} \\ & & \text{Use of storage} \\ \end{aligned} \end{equation} $$

$$ \begin{equation} \begin{aligned} & \text{minimise} & \text{Supply deficit} \\ & \text{subject to} & \text{Conservation of mass} \\ & & \text{Use of storage} \\ & & \text{Link flow capacities} \\ \end{aligned} \end{equation} $$

Solves a problem over

48 months

Solves a problem over

48 months

126 countries

Solves a problem over

48 months

126 countries

1660 trade links

Solves a problem over

48 months

126 countries

1660 trade links

to global optimality in

$2.09$s

vs 12.9s for the Non-Linear Program

# Our disruption
			
			> Reduction of Russian gas exports by 20% per month from February

Note:
			- This is a synthetic scenario
			---
			# Our disruption
			
			> Reduction of Russian gas exports by 20% per month from February

- European countries are reducing reliance on Russian gas

Note:
			- Through the European commission we've seen European countries reducing reliance on Russian gas

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# Our disruption
			
			> Reduction of Russian gas exports by 20% per month from February

- European countries are reducing reliance on Russian gas
			- Russia invaded Ukraine in February

Note:
			- February was chosen as Russia invaded Ukraine in February 2022
			- The month matters as it affects the ability to stockpile

---

# Our disruption
			
			> Reduction of Russian gas exports by 20% per month from February

- European countries are reducing reliance on Russian gas
			- Russia invaded Ukraine in February
			- Use data from April 2015-2019

Note:
			- These years exclude actual disruptions associated with the war and COVID
			- April is when production exceeds consumption, like the start of the gas year

Results: Trade capacity

Results: Trade capacity

Pipeline worse affected

Results: Trade capacity

Pipeline worse affected

Little Russian export capacity by Jan 2017

After disruption

$45.7\%$

of flows changed

Results: Natural Gas deficit

No deficit before disruption

Results: Natural Gas deficit

No deficit before disruption

Large pipeline importers worst affected

Interactive results

Policy implications

Evaluating various scenarios

Trade embargoes
Logistics disruptions
Optimal stockpiling

Of interest to

Governments
Think tanks
Traders
Supply chain managers

Future Work

Include shipping (AIS) data

Future Work

Include shipping (AIS) data

Minimise shipping emissions

Future Work

Include shipping (AIS) data

Minimise shipping emissions
Disrupt shipping corridors

Future Work

Include shipping (AIS) data

Minimise shipping emissions
Disrupt shipping corridors

Apply methods to other commodities

Future Work

Include shipping (AIS) data

Minimise shipping emissions
Disrupt shipping corridors

Apply methods to other commodities

Food

Future Work

Include shipping (AIS) data

Minimise shipping emissions
Disrupt shipping corridors

Apply methods to other commodities

Food
Rare Earth Metals

Mitigating Supply Deficits

Motivation

Motivation

Motivation

Motivation

Motivation

Motivation

Motivation: LNG

Motivation: LNG

Motivation: LNG

Methodology : Data

Methodology : Data

Methodology : Data

Methodology : Data

Methodology : Data

Methodology : Optimisation

Methodology : Optimisation

Methodology : Optimisation

$2.09$s

Results: Trade capacity

Results: Trade capacity

Results: Trade capacity

$45.7\%$

Results: Natural Gas deficit

Results: Natural Gas deficit

Results: Natural Gas deficit

Interactive results

Policy implications

Future Work

Future Work

Future Work

Future Work

Future Work

Future Work

Thank you

Questions?