Shale gas pad development planning under price uncertainty

In this article, we study shale gas pad development under natural gas price uncertainty. We optimize the sequence of operations, gas curtailment, and storage on a single pad to maximize the net present value. The optimization problem is formulated as an mixed-integer linear programming model, which is similar to the one proposed by Ondeck et al. We investigate how natural gas price uncertainty affects the operation strategy in the pad development. Both two-stage and multistage stochastic programming are used as the mathematical framework to hedge against uncertainty. Our case study shows that there is value of using stochastic programming when the price variance is high. However, when the variance of the price is low, solving the stochastic programming problems does not create additional value compared with solving the deterministic problem.