Strategic network design of downstream petroleum supply chains: Single versus multi-entity participation

Abstract

The petroleum supply chain (PSC) is a highly competitive system that motivates complex studies for decisions involving different problems such as the redesign aimed at optimizing existing distribution networks. This paper considers a multi-entity, multi-echelon, multi-product and multi-transportation downstream PSC network with shared installations, resource capacities, supply sources and demand requirements. A deterministic mixed integer linear program (MILP) is developed for strategic design and planning of the downstream PSC network that determines optimal depot locations, capacities, transportation modes, routes and network affectations for long term planning. The MILP maximizes the multi-echelon total profits for the petroleum companies along the supply, refining, distribution and retail stages. A multi-entity PSC network is considered, involving companies’ financial participation in refineries, transportation and storage depots. The MILP is tested with the real-case Portuguese PSC network involving production at local refineries and supply from a regional hub. Uni-entity networks as well as multi-entity networks with competitive or individualistic operation are modeled, presenting the current, grassroots and retrofit designs.