http://www.erasmusenergy.com en-us N/A dejong@kyos.com Tue, 06 Jan 2009 04:15:03 CET 20 http://www.erasmusenergy.com/articles/106/1/Natural-Gas-Storage-Valuation-and-Optimization-A-Real-Options-Application/Page1.html Published in:
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Co-author 1: Matt Davison
Co-author 2: Henning Rasmussen

In this paper we present an algorithm for the valuation and optimal operation of natural gas storage facilities. Real options theory is used to derive nonlinear partial-integro-differential equations (PIDEs) for the valuation and optimal operating strategies. The equations are designed to incorporate a wide class of spot price models that can exhibit the same time-dependent, mean-reverting dynamics and price spikes as those observed in most energy markets. Particular attention is paid to the operational characteristics of real storage units, these characteristics include: working gas capacities, variable deliverability and injection rates and cycling limitations. We illustrate the model with a numerical example of a salt cavern storage facility that clearly shows how a gas storage facility is like a financial straddle with both put and call properties. Depending on the amount of gas in storage the relative influence of the put and call components vary.]]> no@spam.com (Matt Thompson) Thu, 06 Dec 2007 19:34:21 CET http://www.erasmusenergy.com/articles/106/1/Natural-Gas-Storage-Valuation-and-Optimization-A-Real-Options-Application/Page1.html