Monte Carlo Valuation of natural gas investments

This paper deals with the valuation of energy assets related to natural gas. In particular, we evaluate a baseload Natural Gas Combined Cycle (NGCC) power plant and an ancillary instalation, namely a Liquefied Natural Gas (LNG) facility, in a realistic setting; specifically, these investments enjoy a long useful life but require some non-negligible time to build. Then we focus on the valuation of several investment options again in a realistic setting. These include the option to invest in the power plant when there is uncertainty concerning the initial outlay, or the option's time to maturity, or the cost of CO2 emission permits, or when there is a chance to double the plant size in the future. Our model comprises three sources of risk. We consider uncertain gas prices with regard to both the current level and the long-run equilibrium level; the current electricity price is also uncertain. They all are assumed to show mean reversion. The two-factor model for natural gas price is calibrated using data from NYMEX NG futures contracts. Also, we calibrate the one-factor model for electricity price using data from the Spanish wholesale electricity market, respectively. Then we use the estimated parameter values alongside actual physical parameters from a case study to value natural gas plants. Finally, the calibrated parameters are also used in a Monte Carlo simulation framework to evaluate several American-type options to invest in these energy assets. We accomplish this by following the least squares MC approach.

Pressure Drop Studies of Gas-Liquid Bubbly Flow in Vertical Upward Pipeline

This paper describes the experimental and theoretical studies of gas-liquid bubbly flow in vertical upward pipeline carried out at Institute of Mechanics, Chinese Academy of Sciences. Bubbly flow in a vertical pipe with a 3 m long and 5 cm inner diameter plexiglass pipe was experimentally investigated, and studies carried out on the relationship between superficial velocities of the liquid and gas phases and pressure gradient is described. The developed drift-flux model applied to gas-liquid bubbly flow is presented, and the results are compared against the experimental data measured by ours in air/water vertical pipes.

Investigation of High-Speed Combustible Gas Ignited by a Hot Gas Jet Produced in the Shock Tube

The high-speed combustible gas ignited by a hot gas jet, which is induced by shock focusing, was experimentally investigated. By use of the separation mode of shock tube, the test section of a single shock tube is split into two parts, which provide the high-speed flow of combustible gas and pilot flame of hot gas jet, respectively. In the interface of two parts of test sections the flame of jet was formed and spread to the high-speed combustible gas. Two kinds of the ignitions, 3-D "line-flame ignition" and 2-D "plane-flame ignition", were investigated. In the condition of 3-D "line-flame ignition" of combustion, thicker hot gas jet than pure air jet, was observed in schlieren photos. In the condition of 2-D "plane-flame ignition" of combustion, the delay time of ignition and the angle of flame front in schlieren photos were measured, from which the velocity of flame propagation in the high-speed combustible gas is estimated in the range of 30-90m/s and the delay time of ignition is estimated in the range of 0.12-0.29ms.

Measurements of Flow Patterns and Velocities of Gas -Water Two -Phase Flows Using Electrical Resistance Imaging

This paper presents a measurement of flow patterns and flow velocities of gas-water two-phase flows based on the technique of electrical resistance tomography (ERT) in a 40m horizontal flow loop. A single-plane and dual-plane ERT sensor on conductive ring technique were used to gather sufficient information for the implementation of flow characteristics particularly flow pattern recognition and air cavity velocity measurement. A fast data collection strategy was applied to the dual-plane ERT sensor and an iterative algorithm was used for image reconstruction. Results, in respect to flow patterns and velocity maps, are reported.