Abstract
A new energy transition policy in Korea has increased the importance of liquefied natural gas (LNG) in the energy mix. The Asia-Pacific LNG market is inflexible because long-term contracts are dominant. This market characteristic means that the development of policies that ensure a stable supply of LNG is essential. We developed a new model for the optimal LNG import portfolio. The model consists of a two-step portfolio model combining the mean-variance (MV) portfolio and the linear programming (LP) model. In the first step, the MV model was applied to derive the optimal ratio between the long-term and spot contracts. Next, the LP model was used to determine the optimal LNG portfolio. We also applied a fuzzy analytic hierarchy process (AHP) to determine the weights of the cost factors. The application of the fuzzy AHP enabled this research to reflect the tangible and intangible costs more effectively. The optimal LNG portfolio showed that the optimal ratios for the long-term and spot contracts are 89.72% and 10.28% respectively, and the supply ratios in the Middle East and Southeast Asia decreased, while those in the Far East and Oceania significantly increased. The proposed model is able to build an effective LNG import strategy because it reflects the characteristics of LNG markets better than previous models.
Highlights
The Asia-Pacific gas market is growing due to the massive investment in liquefied natural gas (LNG) supplies and increasing demand
As mentioned in the introduction, the weights derived by fuzzy analytic hierarchy process (AHP) were applied as the weights for the economic, national, marine transportation, and natural disaster risks
Considering the policy perspective, we developed a two-step portfolio model that reflects the price policy in Korea, the natural gas security index is shown to be 2.16
Summary
The Asia-Pacific gas market is growing due to the massive investment in liquefied natural gas (LNG) supplies and increasing demand. The LNG market is inflexible in the sense that supply is unable to respond elastically to short-term increases in demand [8] These market characteristics indicate that policy-making and research concerning stable importation is necessary. An increase in renewable energy will increase the demand for LNG because the intermittency of renewable energy requires LNG-fired plants to serve as backup generators to stabilize the electricity supply [14,15] With these conditions, any problems in a natural gas exporting country such as a natural disaster, or marine transportation accident can severely threaten energy security. Considering the Korean situation and value chain of the natural gas market, we developed an optimal LNG portfolio model that considers tangible and intangible costs to improve the importation stability of LNG from the perspective of Yergin’s [16] energy security model. The fifth section concludes the paper and presents the policy implications
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