Combining Strategic and Operational Decision Making in Liquefied Natural Gas (LNG) Logistic

Recent increase in energy prices, concern regarding CO2 emissions, exploration of new energy sources, and some conventional methods of Liquefied Natural Gas transportation have a significant impact on LNG trade to make it more competitive in the energy market. This results in a lot of investment for LNG value chain. For profitable operations such LNG logistics, it is necessary to find the optimal design in terms of the supply chain associated with it. Of special interests are finding an optimal schedule for LNG delivery by ships from production terminal to regas terminals and satisfying inventory and port constraints by minimizing total cost and selecting an optimal combination of contracts and suppliers. This can be possible by modelling a combination of the inventory routing problem (LNG-IRP) and the model to minimize procurement cost by selection of LNG contracts that varies in price formulation, duration, quality etc. These various cost factors in the objective makes the combined model more challenging. To find the lowest cost solution for the model, optimization-based approaches can be very useful. Therefore, in this paper, we address these circumstances by proposing a mixed-integer linear programming model that helps the buyers select the best combination of suppliers and contract, and based on selecting amount of contract, buyer's demand (inventory capacity) in each regas terminal is satisfied by minimizing stock out, unmet demand, and losts production.