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Caledonia Natural Gas Storage Project

(Darby Grande, 1999)

Caledonia field is a dry natural gas reservoir that will soon be used for temporary storage of natural gas. The client, who owns the reservoir, must publicly announce the type and size of contracts he wishes to offer for the upcoming year. The first phase of this study is to determine an optimal mix of contracts for him to offer during the open season. The second phase of the project is to determine which of the bids returned by potential customers should be accepted to maximize the client's revenue. A linear programming model was constructed to solve the first phase of the study. The client is able to change some of the constraints related to market demand or risk to suit his purposes, and the model will suggest a corresponding optimal mix of contracts. The second model involves choosing to accept or reject the bids (a binary choice), so a mixed integer programming model was more appropriate for the second phase of the study. The results of this model depend heavily on the details of the returned bids, so the client should wait until the open season is ended before using this model. Once the submitted bids are entered, the model will suggest a mix of contracts to accept that will not exceed the capacity of the reservoir.

Richard S. Barr
Fri Feb 17 16:09:51 CST 2006