ASSESSMENT 1 2024
SUBJECT: CHEMICAL PROCESS DESIGN II
CODE: CEL317B
Lecturer: PROF. A. KOLESNIKOV 3-720
Date: 05 August 2024
Due Date: 12 August 2024
Student surname, initials: Mthembu SM
Student number: 223134114
RUBRICS
Item Description Mark max/given
1. Introduction (previous work in literature) 10 / xx
2. Linear programming model equations are given 20 / xx
and explained
3. Running LP model file supplied (EXCEL 30 / xx
spreadsheet) and correct operation
demonstrated (no errors in the model)
4. Modeling results given (graphs/tables…etc) and 20
discussed. Conclusions made
5. Numbering, spelling and logic 10 / xx
6. List of references. Links between text and 10 / xx
references in the list
TOTAL: 100 / xxx
Table of Contents
1. INTRODUCTION...................................................................................................... 3
2.LINEAR PROGRAMMING MODEL EXPLANATION ................................................ 4
3.RESULTS AND DISCUSSION ..................................................................................... 7
3.1. RESULTS ............................................................................................................. 7
Figure 3.1.1. Waterfall chart illustrating how each product contributes to the total
profit ......................................................................................................................... 7
Figure 3.1.2. 3-D bar graph illustrating the relationship between the quantity of
products produced from the two Crude oil sources .................................................. 7
3.2. DISCUSSION ....................................................................................................... 8
4.CONCLUSION ........................................................................................................... 10
References .................................................................................................................... 11
1. INTRODUCTION
Crude oil refining is a very important process in the petroleum industry, as it
is used to breakdown crude oil, a naturally occurring, unrefined petroleum
product composed of hydrocarbon deposits and other organic molecules
(Speight, 2014), into end products such as gasoline, kerosene, diesel,
LPG’s, lubricants and jet fuel, through refining processes starting off with
crude oil distillation then followed by various conversion processes
cracking, alkylation, and reforming.
These crude oil products are used as fuels for transportation, heating and
electricity, road construction (tar), petrochemicals (used to produce
plastics, synthetic rubber) and lubricating oils.
Linear programming (LP) is a mathematical optimization model used to
obtain the best possible outcome for a given model, that has linear
constraints. Within the framework of crude oil refining linear programming is
beneficial in optimizing different operational decisions to maximize profits.
The application of LP in refining involves scheduling of production,
allocation of resources and the balancing of product outputs to meet market
demands and operational constraints. The principal goal of LP in this
context is to maximize or minimize a specific objective, such as profit or
cost, whilst adhering to constraints involving resources, capacities and
regulatory requirements (Gary, et al., 2007). Linear programming is widely
used in the petroleum industry due to its ability to handle large-scale
optimization problems and provide actionable insights for decision-making
(Edgar, et al., 2001)
2.LINEAR PROGRAMMING MODEL
EXPLANATION
The objective of this linear programming model is to meet the minimum production
requirements for the crude oil products and to maximize the profit of the crude oil
refinery in Ethiopia, whilst considering the cost of crude oil and the selling price of the
products.
Model Components:
Defining the decision variables:
XQ- Liters of Qatar crude oil too be purchased
XM- Liters of Malaysian crude oil to be purchased
Objective function: The objective function which is to maximize the profit of the
Ethiopian petroleum plant is described by the difference between the total revenue and
the total cost.
maximize profit = revenue – cost………………………………….equation 2.1.
Where revenue is the total amount of money earned from selling the crude oil products
thus,
Total Revenue = gasoline revenue + kerosene revenue + lubricant revenue
………………………………………………………………………………………equation 2.2.
So,
𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑜𝑓 𝑎 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 = 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 (𝑃) ∗ 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑
………………………………………………………………………………………equation 2.3.
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Defining the quantity of product produced:
Gasoline – 0.3XQ + 0.4XM
Kerosene – 0.4XQ + 0.2XM
Lubricants – 0.2XQ + 0.3XM
Thus, final revenue equation:
𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒
= 𝑃𝐺 (0.3𝑋𝑄 + 0.4𝑋𝑀) + 𝑃𝐾 (0.4𝑋𝑄 + 0.2 𝑋𝑀) + 𝑃𝐿 (0.2𝑋𝑄
+ 0.3𝑋𝑀)
Cost:
Total cost describes the total amount of money required to purchase the crude of from
both sources.
𝐴𝑛𝑑 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 = 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑄𝑎𝑡𝑎𝑟 𝑐𝑟𝑢𝑑𝑒 𝑜𝑖𝑙 + 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑀𝑎𝑙𝑎𝑦𝑠𝑖𝑎𝑛 𝑐𝑟𝑢𝑑𝑒 𝑜𝑖𝑙
………………………………………………………………………………………equation 2.4.
Since cost per liter of crude oil is given then;
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = $1,5𝑋𝑄 + $1,2𝑋𝑀
Thus, the final objective function becomes:
𝑀𝑎𝑥𝑖𝑚𝑖𝑧𝑒 𝑝𝑟𝑜𝑓𝑖𝑡 = 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 – 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡
= [ 𝑃𝐺 (0.3 𝑋𝑄 + 0.4 𝑋𝑀) + 𝑃𝐾 (0.4𝑋𝑄 + 0.2𝑋𝑀) + 𝑃𝐿 (0.2𝑋𝑄
+ 0.3𝑋𝑀) ] – [$1,5𝑋𝑄 + $1,2𝑋𝑀 ]
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Constraints:
Constraints describe the limitations or requirements that must be satisfied within the
system that needs to be optimized.
In this model there are two sections of constraints, these being the product yield
constraints, which describes the amount of product that needs to be produced in a day
and the availability constraint, which describes how much crude can be bought per day.
Product yield constraints:
• 0.3 XQ + 0.4 XM ≥ 2000 (Gasoline)
• 0.4 XQ + 0.2 XM ≥ 1500 (Kerosene)
• 0.2 XQ + 0.3 XM ≥ 500 (Lubricant)
Availability constraints:
• XQ ≤ 9000
• XM ≤ 6000
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3.RESULTS AND DISCUSSION
3.1. RESULTS
Profit contribution by products
Profit Contribution(USD)
Product
Figure 3.1.1. Waterfall chart illustrating how each product contributes to the total profit.
Production vs Crude oil mix
4000
Qauntity produced (L)
3500
3000
2500
2000
1500
1000
500
0
gasoline kerosene lubricant
Crude oil product types
Qatar (l) Malaysia(l)
Figure 3.1.2. 3-D bar graph illustrating the relationship between the quantity of products
produced from the two Crude oil sources.
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3.2. DISCUSSION
1. Profit contribution analysis
The waterfall chart (Figure 3.1.1.) illustrates the contribution that each product produced
has on the total profit. It is seen that Kerosene and Gasoline have rather a low or
negative contribution to the overall profit. Whilst Lubricants have a very positive
contribution to the overall profit.
The negative profit contributions of gasoline and kerosene indicate that the cost of
producing these products outweighs the revenue generated from their sale (this is
illustrated and calculated on the linear programming model excel spreadsheet), this
could be due to various reasons. Firstly, high production costs, if the costs of refining
crude oil into kerosene and gasoline is too high, this could be due to the crude oil being
expensive, thus leading to negative profit margins. Secondly, the market price of
gasoline and kerosene could be lower than expected, leading to lowered revenues. The
volatility of oil markets often impacts the pricing of refined products, as discussed by
(Brown, et al., 2019).
In contrast the positive contribution of lubricants rather suggests that the product is
being produced and sold at a profit. This suggests that either the refinery operates
efficiently in producing lubricants or the market conditions for lubricants are more
advantageous. According to (Anderson & Clark, 2021), lubricants tend to have a higher
profit margin compared to other refined petroleum products due to their higher value
and less volatile pricing.
The results suggest that the refinery could re-evaluate, review and possibly adjust the
pricing strategy of the products kerosene and gasoline or alternatively seek markets
where the sale of the products would be more profitable, increasing their profit
contribution or they consider shifting production towards lubricants.
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2.Consideration of crude oil sources
The 3-D bar graph (figure 3.2.1.) illustrates the quantity of crude oil produced from the
two different crude oil sources (Qatar and Malaysia). A higher production volume from a
particular source might indicate a better yield or cost-effectiveness, which aligns with
studies on the optimization of crude oil blending (Wang & Zhang, 2019). The trend on
the bar graph is leaning towards Qatar being the source that has a higher production
volume, this can only be finalized with further analysis through time. The relative yields
from each crude oil source may have an impact on the cost allocation and consequently
the profit margins, as discussed by (Jones & Robinson, 2021).
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4.CONCLUSION
The losses from kerosene and gasoline need urgent action. By examining production
costs, market prices, and operational efficiency, the refinery can find ways to address
these issues. Shifting focus to more profitable products like lubricants or improving the
use of crude oil sources could boost overall profitability.
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References
• Anderson, D. & Clark, H., 2021. Petroleum Product Market Dynamics and Profit
Margins. Journal of Energy Economics, 34(3), pp. 250-263.
• Brown, J., Green, S. & Petal, R., 2019. Volatility in petroleum markets: Pricing
strategies and economic implications. International Journal of Energy Research,
45(4), pp. 500-515.
• Edgar, T., Himmelblau, D. & Lasdon, L., 2001. Optimization of chemical
processes. 2nd ed. New York: McGraw-Hill.
• Gary, J. H., Handwerk, G. E. & and Kaiser, M. J., 2007. Petroleum Refining:
Technology and Economics. 5th ed. Boca Rotan: CRC Press.
• Jones, T. & Robinson, M., 2021. Crude oil refining and cost allocation strategies.
International Journal of Energy Economics, 34(4), pp. 201-218.
• Speight, J., 2014. The Chemistry and Technology of Petroleum. 5th ed. Boca
Rotan: CRC Press.
• Wang, P. & Zhang, X., 2019. Optimization of crude oil blending for enhanced
product yield. Energy & Fuels, 33(7), pp. 6139-6147.
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