Optimal Route For Crude Oil Transportation From Ghana To East China

In supply chains of the petroleum industry, maintaining a balance between production and consumption of petroleum derivatives is a crucial issue. Basically, this kind of chain has several elements like producer bases, consumer bases, intermediary terminals that are linked by a transport network. These elements should cooperate to reach the global balance of the system with a minimum transportation cost. In order to achieve the sole aim of any logistics problem, that is, to meet customer requirements at a minimum cost, it is imperative especially in maritime transport to make very intelligent and cogent decisions involving movement of goods by sea. With China’s degree of dependence upon overseas oil increase every year, the supply of oil resources impacts country’s economic development and social stability directly. However, overseas oil imports exists such as piracy attacks, line accident and other risk during transportation, so a reasonable choice of transportation paths can control cost, reduce risk. This research uses combinatory approach of finding an optimal shipping route for crude oil tankers wanting to make a sea journey from Takoradi on the West coast of Africa to the ports of Shanghai and Ningbo in East China using both DEA and stochastic frontier production function model to analyze the available shipping routes and examines the factors significant to it.Data used in this research were both quantitative and qualitative by nature. Tools for data collection employed include published articles like books, journals and port annual reviews and information from the internet. Data used in this research largely came from personal interviews with many players in the crude oil transport industry. Reliability of data was tested to confirm accuracy and validity of the research. Evaluation of optimal route was done first by using Malmquist DEA with variable return to scale, then Translog form of stochastic frontier production function which also calculated in-optimality effects. Two conditions were considered for proof of hypotheses in stochastic frontier analysis and Maximum Likelihood method was used to test the hypotheses. The presence of in-optimality effects was examined using one-sided generalized likelihood-ratio statistics.The results of the research showed that taking all the scientific parameters that were used in the analysis into consideration, the optimal shipping route to use when transporting crude oil from Ghana to East China should be the Cape of Good Hope route. Apart from been more costly to use the Suez Canal route, it also has serious security breaches that may hinder the smooth passage of crude oil tankers. This is because the ships immediately fall into the Gulf of Aden, which is one of the world’s currently most active piracy regions if not the most active because of the infamous Somali pirates. The research found out that, optimality must be measured by time, cost, distance, security situation and reliability. In terms of limitation, this research considered the multi-attribute nature of maritime route characteristics and used production function model to capture the most salient aspects of characteristics important for finding an optimal shipping route. Further research should focus on the areas left out by this research.