Natural Gas Storage Valuation and Optimisation Under Time-Inhomogeneous Exponential Lévy Processes

We analyse a stochastic control problem for the valuation of a natural gas storage facility while taking into account operating characteristics. The underlying natural gas spot price dynamics is assumed to follow time-inhomogeneous exponential Lévy process by F.E. Benth and C. Sgarra. This underlying incorporates common features of gas spot prices such as seasonality, mean-reversion and price spikes with seasonal jump intensities. The corresponding HJB equation is the non-linear PIDE which is solved by an explicit finite difference method. The numerical approach gives us both the value of the storage contract and optimal operating strategy depending on the gas price, current level of gas in the storage and time. The numerical method is implemented for a particular example. The effects of seasonality and seasonal jump intensity are investigated by observing the surfaces of control strategies and contract values