This two day course on flexibility instruments in the natural gas market focuses mainly on gas storage, swing and take-or-pay contracts and to a lesser degree on transportation and LNG. The purpose of the course is to provide a better understanding of flexibility instruments, their value drivers, risk factors, portfolio management, trading and hedging strategies.

1. 13-14 October, 2014, Amsterdam
HOW TO USE STORAGE AND TAKE-OR-PAY CONTRACTS
GasMarketFlexibilityInstruments
Cyriel De Jong, KYOS Energy Consulting
Course Leader

2. This two day course on flexibility instruments in the natural gas market
focuses mainly on gas storage, swing and take-or-pay contracts.
A summary of the course
The purpose of the course is to provide a better
understanding of flexibility instruments, their value drivers,
risk factors, portfolio management, trading and hedging
strategies.
In the course we will study how flexibility instruments fit
into a company’s portfolio to manage variations in demand.
You will learn how to value the instruments, use them in a
portfolio of products and assets, and develop trading and
hedging strategies around them.The course explains a
number of contract structures, which include oil indexation,
penalty structures, period quantity constraints, make-up
and carry-forward rights.
OURS
Who should attend?
The course aims to attract a wide range of people active in
the natural gas value chain, including energy traders, asset
developers, portfolio and risk managers, energy market
analysts, regulators and consultants.
The course does not require any in depth knowledge of
specific areas.The instructors will present technical details
in an intuitive and understandable manner, ensuring the
course remains appealing and clear both to quantitative
and non-quantitative people.
Course Highlights
▶▶ Insights into gas storage & swing contract valuation
approaches
▶▶ Principles of delta hedging, and implementation of
hedge strategies
▶▶ Analyse different trading strategies with a practical
back-test
GasMarketFlexibilityInstruments

3. AGENDA
Agenda - Day one 9.00 - 17.00
Course sessions
Session 1:
European gas markets, storages and
contract structures
▶▶ Overview European gas markets and trading hubs
▶▶ Traditional use of flexibility instruments in a portfolio:
▷▷ Seasonal: summer – winter demand variations
▷▷ Peak shaving
▷▷ Typical injection/release patterns
▶▶ Overview of gas storage assets:
▷▷ Overview of European gas storages
▷▷ Primary parameters: Injection, withdrawal, working gas
volume
▷▷ Pricing of storages in the German market
▶▶ Overview of swing / Take-or-Pay contracts
▷▷ Variable contract volume, with Take-or-Pay constraints
▷▷ Annual and other period constraints
▷▷ Indexed strike prices with monthly lagging and averaging
▷▷ Hard and soft penalties for violation of constraints
▷▷ Carry-Forward and Make-Up rights
Session 2:
Storage valuation: Trading forwards in a
dynamic hedging strategy
▶▶ Overview valuation approaches to physical and financial
storage
▶▶ Understanding the forward curve: interaction between
storage costs and forward prices
▶▶ Forward curve building: from a curve of tradable contracts
to a smooth daily ‘expected’ curve
▶▶ Understanding intrinsic value:
▷▷ Daily intrinsic, monthly intrinsic or tradable intrinsic
▷▷ Incorporation of liquidity and trading costs
▷▷ Impact of storage constraints
▶▶ Developing a cash-flow valuation model for a storage
investment
▶▶ Rolling intrinsic valuation: comparison of different ‘rolling’
strategies
▶▶ A storage as a basket of time-spreads
Forward curve modeling and simulation
▶▶ Forward curve dynamics:
▷▷ Spot versus forward price dynamics
▷▷ The volatility term structure
▷▷ Elements of a multi-factor model: short-term, long-term
and winter-summer spread uncertainties
▶▶ Correlation and co-integration between gas and oil prices
▷▷ Implications for the valuation of gas contracts with
indexed strike prices
Registration: 8.30 - 9.00
Coffee breaks included in morning and afternoon. Lunch is scheduled from 12.30-13.30.

4. L
AGENDA
Agenda - Day two 9.00 - 17.00
Course sessions
Session 3:
Gas price dynamics (focus on spot)
▶▶ Short intro option theory and real options in energy markets
▶▶ Primary price dynamics in natural gas markets
▶▶ Volatility levels and estimation procedures for spot and
forward prices
▷▷ Historical versus implied volatility
▷▷ Moving average and Exponentially Moving Average
volatility
▶▶ Mean reversion rate: definition and estimation approaches
▶▶ What history to use for mean-reversion and volatility?
▶▶ Seasonal patterns in volatility and mean-reversion
Option valuation of storage and Take-or-Pay
contracts
▶▶ The tree approach for valuation of an American-style
option:
▷▷ Setting up the tree consistent with market volatility
▷▷ Backward induction
▷▷ Forward valuation
▶▶ The least-squares Monte Carlo approach for valuation of an
American-style option
▷▷ Similarity with tree approach
▷▷ Benefits of simulations
▷▷ Extension of this approach to storage and swing valuation
Session 3:
Practical application of valuation and trading
concepts
▶▶ Comparing intrinsic value with rolling intrinsic and full
option value
▶▶ Trading strategy assumptions behind the different
valuations
▷▷ Impact of market liquidity constraints
▷▷ Impact of uncertainty about volatility and mean-
reversion
▷▷ Interpreting the delta hedges
▶▶ Guidelines for setting up a backtest
▷▷ Impact of changing volatility, forward curve shapes and
mean-reversion over time
▷▷ Comparing initial values with realized values
▷▷ Comparing ‘optimal’ storage injections/withdrawals with
actual operator behavior
Registration: 8.30 - 9.00
Coffee breaks included in morning and afternoon. Lunch is scheduled from 12.30-13.30.

5. Before Cyriel de Jong founded
KYOS, he was assistant professor at
Erasmus University. Since 2001 he
has been a trainer in energy markets
mainly focusing on financial risk
management and energy finance.
Cyriel has done a great number of
projects related to energy derivative
valuation, risk management and
investment analysis (including real
options). He is particularly active in
the application of fi nancial simulation
methodologies to value power plants,
gas storages, long-term contracts, and
transportation. Cyriel holds an MSc
in Econometrics from the University
of Maastricht and a PhD in Financial
Derivatives from Erasmus University.
“I highly recommend this course
as it gives insights into the product
complexity in both a quantitative and
economic approach. It brings a strong
understanding of the challenges and
proposes clear solutions. I appreciated
the openness of the teachers towards
their proprietary models and their
eagerness to take discussions into the
details.”
Roberto Frassanito, Energy Structured
Management, CW&CEE at EGL Trading AG
“If you are starting out with building a
storage model, or indeed just want to
know a little more about the models
that are used in the Gas industry, I
would highly recommend this course
to you.The accompanying material
is a valuable resource to have at your
disposal, while the course is useful, run
by nice guys, in a great location - what
more can you ask for?”
Ben Evans, Quant Trading at WINGAS
GmbH Trading) at Trianel Gmbh
“The course was very interesting and
everything was well organized. I would
recommend it.”
Alice Sozzi, Gas Risk Controlling at E.ON
Cyriel de Jong
Partner, KYOS Energy Consulting
Reviews:
LEADERCOURSELEADER

6. LANGUAGE
The workshop will be delivered in English.
DATE
13-14 October, 2014, Amsterdam, The Netherlands
SCHEDULE
Each day starts at 09.00 and finishes at 17.00hrs.
REGISTRATION
http://www.energy-expert-network.com/courses
E-mail: Johanna.Oberg@energy-expert-network.com
Phone:+46 (0) 85 333 2599
FEES
Early Bird 2225€ + Dutch VAT
(register before 1 September)
Standard price 2475€ + Dutch VAT
MULTIPLE REGISTRATION DISCOUNT
Register two or more people from the same company
and get a 10% discount per person.
FOOD AND BEVERAGE
Food and beverages will be provided to the
participants during the day. Specific wishes can be
submitted to the organization.
LAPTOP
Provided the character of the workshop participants
are required to bring a laptop, which has installed MS
Excel.
DOCUMENTATION
Participants receive documentation, calculations and
exercises in a manual.
ABOUT THE ORGANIZERS
ENERGY EXPERT NETWORK
The Energy Expert Network is a network of experts
and hands-on energy market participants that provides
companies with tailored courses.
The Energy Expert Network consists of the ‘best of the
best’ industry experts, well known for their knowledge and
experience in teaching energy industry professionals. Energy
Expert Network also provide open courses on fixed dates in
co-operation with external experts.