Asset stranding in natural gas export facilities: An agent-based simulation

• Published in: Energy policy Vol. 132; pp. 132 - 155
• Main Authors: Guo, Yingjian, Hawkes, Adam
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.09.2019; Elsevier Science Ltd
• Subjects: Agent-based modelling; Agent-based models; Assets; Australia; Computer simulation; Constraint modelling; Contract-driven investment; Decision making; Energy policy; Expectations; Exports; Gas production; Infrastructure; Investors' responses to markets; issues and policy; Leverage; Market signalling; Markets; Natural gas; Natural gas asset stranding; North America; Oil and gas production; risk; Sales; Simulation; Spot trade simulation; Stranding; Trade; Variation; Australia; North America; Agent-based modelling; Natural gas asset stranding; Contract-driven investment; Spot trade simulation; Market signalling; Investors' responses to markets
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2019.05.002

This paper analyses the scale of asset stranding of global natural gas production and transmission infrastructure between 2015 and 2060 using Gas-GAME-Spot, an agent-based gas-sector model. It extends the existing modelling efforts by considering contract constraints in short-term gas sales and explicitly simulating trade in two types of spot markets. The study also contributes to the methodologies of stranded asset analysis by taking into account two aspects which are commonly overlooked: market fluctuation subject to the changing export capacities and the impacts of market signals on investor decision making. The results of the base scenario indicate that if gas demand follows current policy expectations, the scale of asset stranding is likely to be limited. This is attributed to supply capacity shortage of medium-sized exporters due to a slowing of their investment. Moreover, two alternative scenarios show that, when the markets face sudden reduction in demand, they leverage the flexibilities in their long-term contracts and opt more gas through spot trade. Though the issue of stranding is not significant globally in these scenarios, exporting regions with high short-run delivery costs, especially North America and Australia, have higher risks of asset stranding as they are arguably less competitive in spot sales. •Gas-GAME-Spot simulates gas export asset stranding with an agent-based framework.•Global stranding is limited due to reduced investment by medium-sized exporters.•Markets can alleviate asset stranding by reflecting declined demand in contracting.•Contract-based trade bounds the stranding risk if future demand decreases abruptly.•Export regions with higher short-run costs face more risks of stranding.