Pipeline Optimization / Optimisation

Problem: Moving resources along routes with limited capacities at minimum expense.

This model is an example of a "network" problem - requiring the movement of resources, at minimum cost, along different routes with which varying costs are associated. With the addition of limits to capacity along the routes, it becomes "capacitated". Oil and gas pipelines, truck and air routes may be utilised at their highest cost-efficiency by applying the principles demonstrated in this model.

As the operator of an oil supply network, you must choose among several available pipelines from two wells to three pumping stations and from the pumping stations to four refineries. Wells have a monthly supply capacity which must not be exceeded, capacities of the pipelines may be limited, and costs vary among the pipelines. In addition, monthly refinery demand must be fully met.

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You must decide how many barrels per month to pump along each pipeline. At present, no pipeline is operating between Well 1 and Pumping Station C, between Pumping Station A and Refineries 3 and 4, and between Pumping Station C and Refinery 1. The decision on how much material to send along a given pipeline is governed by the monthly cost per unit on that pipeline and by the necessity of satisfying refinery demand without exceeding monthly well supply.

The objective in this model is to minimise the Total Pumping Cost without exceeding either the monthly output capacity of the wells or the capacity of the pipelines, while meeting demand at each refinery.

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