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Strategic Eurasian Natural Gas Model for Energy Security and Policy Analysis / Chi-Kong Chyong and Benjamin F. Hobbs. Cambridge : Electricity Policy Research Group, 2011, 110 p. (EPRG1115)http://www.eprg.group.cam.ac.uk/wp-content/uploads/2011/03/EPRG-WP-1115.pdfAbstract:The mathematical formulation of a large-scale equilibrium natural gas  simulation model is presented. Although large-scale natural gas models  have been developed and used for energy security and policy analysis  quite extensively (e.g., Holz (2007), Egging et al. (2008), Holz et al.  (2009) and Lise et al. (2008)), this model differs from earlier ones in  its detailed representation of the structure and operations of the  Former Soviet Union (FSU) gas sector. In particular, the model  represents: (i) market power of transit countries, (ii) transmission  pipelines in Russia, Ukraine, Belarus and Central Asia, (iii)  differentiation among gas production regions in Russia, and (iv) gas  trade relations between FSU countries (e.g., Gazprom’s re-exporting of  Central Asian gas). To demonstrate the model, a social benefit-cost  analysis of the Nord Stream gas pipeline project from Russia to Germany  via the Baltic Sea is provided. It is found that Nord Stream project is  profitable for its investors and the project also improves social  welfare in all market power scenarios. Also, if transit countries  (Ukraine and Belarus) exert substantial market power then the economic  value of Nord Stream to its investors and to society improves  substantially. We also found that the value of Nord Stream investment is  rather sensitive to the degree of downstream competition in European  markets and that lack of downstream competition might result in the  negative value of the Nord Stream system to Gazprom (© EPRG)