Simulating the game-theoretic market equilibrium and contract-driven investment in global gas trade: How supply strategies, demand uncertainties, and trade relationships affect the long-term future

Understanding the gas market in the medium and long-term future facilitates political and economic debate on gas business development globally. Existing models commonly simulate the optimal scenario over long time periods, missing insights on how the gas trade business may evolve. This thesis formulates a new model, Gas-GAME, in an agent-based framework, to study future gas market development and global trade scenarios. It combines a short-term game-theoretical market equilibrium, simulated via a Mixed Complementarity Problem, with the real-world contract-driven investment process in gas assets. The model captures: 1) price fluctuations resulting from investment cycles; and 2) how an individual player’s strategy, perspective, and incentives affects the gas market. Gas-GAME is applied to address the impacts of uncertain North American gas export strategies. An aggressive expansion benefits North America, but the Middle East and Australia see considerable revenue losses. Conversely, tight supply due to North American conservative expansion is observed, where Europe can become over-dependent on Russian supply. Gas-GAME-Risk extends Gas-GAME by incorporating investors’ risk. Its application to unexpected demand changes due to climate constraints shows how real-world investors shift their development focus facing uncertain markets. This work also presents the first systematic and quantitative analysis addressing the impacts of a China-US LNG trade tariff, showing a potential risk in Russian gas export. Finally, the possibility of asset stranding of gas export facilities is addressed by Gas-GAME-Spot, which advances Gas-GAME by simulating how the theoretical market equilibrium is approached through contract commitment and spot trade. This study improves stranded asset analysis by examining how market signals affect investors’ decision making. When markets see a sudden demand reduction, nearly 100 BCM/yr of North American and Australian export capacity will be stranded in 2035, due to their difficulty in competing in spot sales. The effective measures of stranding mitigation are also provided.Open Acces