“The ability to add new facts as they become available is one of the most beneficial aspects of this model.”Levi DeLissa
Data Integration & Optimization Engineer, East Daley
INDUSTRY: Oil and Gas
Many organizations use optimization to assist with upcoming decisions. However, optimization has more applications than just large-scale decision making. One such example is East Daley Capital (EDC) and its use of optimization to model complex historical datasets. EDC provides in-depth data and information about North American midstream energy assets – processing, storing, transporting and marketing of oil, natural gas and natural gas liquids. With data from dozens of different sources available at different frequencies and qualities, Mixed Integer Programming (MIP) is a useful framework for filling gaps in the data. EDC’s key thrust behind using a MIP model is to estimate the interconnectivity of wells, pipelines, and processing plants as these data are only known to the companies that own them. East Daley uses Gurobi to accelerate the development and execution of their internal models.
Complex systems often behave in predictable ways. However, when confronted with a mix of known and unknown information, it is often difficult to fill in the missing pieces. East Daley Capital gathers copious amounts of data on natural gas pipelines and the ecosystem of natural gas in order to understand the impact or potential effects on businesses. For example, to correctly value gas gathering and processing systems in Oklahoma’s Anadarko Basin, an accurate throughput forecast is needed. In a perfect world, the specific gas wells connected to the system would be known and one could then forecast the system by aggregating forecasts for the individual wells. However, there is little to no public information detailing the wells that connect to each processing system. Even though the exact information is not available, that doesn’t mean there is no information. The company that operates the Gathering and Processing (G&P) system discloses stylized maps of the system, the Energy Information Administration (EIA) provides annual throughputs for gas processing plants, and the Oklahoma Tax Commission provides well production information. This presents a litany of problems:
In order to address these problems, East Daley could have chosen to refocus their efforts elsewhere or do consulting with limited scope. However, EDC decided to find a way to make the data more holistic and therefore, far more insightful.
East Daley developed a mixed integer programming (MIP) model to fill in missing data with:
The model considered the following information:
There is a hierarchy for rules of thumb and another one for hunches with the rules of them carrying more weight. Therefore, given the historical data of wells, processing plants, pipeline networks, and the hierarchies of rules of thumb and hunches, the MIP model identifies which wells are “more likely” to be connected to pipelines that ship the volumes processed at plants, while satisfying the rules of thumb and hunches. In this MIP model, everything is a soft constraint – even “known” data may not be 100% accurate. There is a hierarchy of assumptions that leads to a multi-objective model. For example, regulatory filings are more important than hunches. The primary output of the MIP model was a partitioning of the wells, pipelines, and plants into systems. Results were then rolled up into higher-level models, such as a forecasting model and a macro-economic energy model.
The MIP model was built by Levi DeLissa, Ryan Smith and Justin Carlson using the Gurobi C API. When solving the model with the Gurobi Optimizer, several Gurobi technology features were heavily used, including:
The model ran for 24+ hours, yet good solutions were typically available within 4 to 12 hours.
The MIP Model:
East Daley chose Gurobi because of Gurobi’s performance. Gurobi solved the problem faster than other solvers. EDC also found Gurobi support to be very responsive. Although EDC originally built its model using the Gurobi C API, they ultimately used the Python API because it provided much higher productivity. In particular, the overall flexibility in handling multiple objectives, allowing for variable hints, and generalized constraints is very helpful.
East Daley Capital was founded in 2014. It has 28 employees and is in possession of the world’s largest North American midstream asset level database. East Daley sells valuable information to investors, such as hedge funds, private equity firms, etc. East Daley studies many different energy markets. EDC brings greater transparency to the energy financial market by arming sophisticated investors with deeper, more accurate data that empowers their investment decisions.
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