Abstract
The increasing demand of energy has turned the shale gas and shale oil into one of the most promising sources of energy in the United States. In this article, a model is proposed to address the long-term planning problem of the shale gas supply chain under uncertain conditions. A two-stage stochastic programming model is proposed to describe and optimize the shale gas supply chain network. Inherent uncertainty in final products’ prices, such as natural gas and natural gas liquids (NGL), is treated through the utilization of a scenario-based method. A binomial option pricing model is utilized to approximate the stochastic process through the generation of scenario trees. The aim of the proposed model is to generate an appropriate and realistic supply chain network configuration as well as scheduling of different operations throughout the planning horizon of a shale gas development project.
Highlights
In recent years, technological advances have provided necessary tools for the exploitation of new sources of fossil fuels in the United States
The amount of freshwater required at each shale site is satisfied by the total amount of water acquired at different freshwater sources plus the water recovered onsite through the implementation of different technologies including multistage flash (MSF), multi-effect distillation (MED), and reverse osmosis (RO) [18]
It was thought that the prices of West Texas Intermediate (WTI) crude oil and natural gas delivered at the Henry Hub (HH) maintained a 10-1 relationship, so that one barrel of WTI crude oil priced at roughly 10 times 1 million British thermal units (MMBtu) of natural gas
Summary
Technological advances have provided necessary tools for the exploitation of new sources of fossil fuels in the United States. The focus has shifted from recognizing available natural gas resources toward coordinating the necessary operations to allocate these resources into production and delivery of subsequent products to different types of markets while maximizing profitability This objective turns the problem of optimal design and management of the shale gas supply chain network considering practical limitations of extreme relevance. A two-stage stochastic model was developed by Guillen et al [11] for the design of a three echelon (production-storage-market) supply chain with uncertain customer demands In this case, the proposed formulation took into account the maximization of profitability and customer satisfaction and the minimization of financial risks due to the inherent inaccuracy of the demand forecasts. Gao and You [14] developed a two-stage stochastic model to determine an optimal design and operation of the shale gas supply chain under uncertain estimated ultimate recovery (EUR). The aim of this work is to incorporate and analyze the influence of the market price variations in the design and operations of the shale gas supply chain
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