Stochastic Programming Approach to Optimal Design and Operations of Integrated Hydrocarbon Biofuel and Petroleum Supply Chains

Abstract

This paper addresses the optimal design and strategic planning of the integrated biofuel and petroleum supply chain system in the presence of pricing and quantity uncertainties. The drop-in properties of advanced hydrocarbon biofuels pose considerable potential for biofuel supply chains to leverage the existing production and distribution infrastructures of petroleum supply chains, which may lead to significant capital savings. To achieve a higher modeling resolution and improve the overall economic performance, we explicitly model equipment units and material streams in the retrofitted petroleum processes and propose a multi-period planning model to coordinate the various activities in the petroleum refineries. Furthermore, in order to develop an integrated supply chain that is reliable in the dynamic marketplace, we employ a stochastic programming approach to optimize the expectation under a number of scenarios associated with biomass availability, fuel demand, crude oil prices, and technology evolution. The integrated model is formulated as a stochastic mixed-integer linear program, which is illustrated by a case study involving 21 harvesting sites, 7 potential preconversion facilities, 6 potential integrated biorefineries, 2 petroleum refineries, and 39 demand zones. Results show the market share of biofuels increases gradually due to the increasing crude oil price and biomass availability.