Natural Gas Curtailment Marketing Case Assignment (Case Study Sample)
In June 1980 the general manager of Texas Harry Sinclair received a notification from Ben Elliot that there is natural gas shortage in the Houston area due to heat wave. For the shortage in natural gas the manager decided to allocate gas to its customers on the following priorities; first he prioritized Residential and commercial heating and cooling, second he made a Priority on Commercial and industrial firms that use natural gas as source of raw material and Thirdly on Industrial firms that use natural gas as a boiler fuelsource..
NATURAL GAS CURTILMENT CASE STUDY
In June1980 the general manager of Texas Harry Sinclair received a notification from Ben Elliot that there is natural gas shortage in the Houston area due to heat wave. For the shortage in natural gas the manager decided to allocate gas to its customers on the following priorities; first he prioritized Residential and commercial heating and cooling, second he made a Priority on Commercial and industrial firms that use natural gas as source of raw material and Thirdly on Industrial firms that use natural gas as a boiler fuel
According to Ben Elliot Agri- Chem, Corporation’s uses on the natural gas were to be in the second and third priority. Enerco decided to enforce “rolling browouts” which is temporary and periodic curtailment of natural gas supplies.
Now we need to study and analyze the information and decide which product the company should produce that will be less affected by curtailment of Natural gas and decide what production level the company should use to maximize the profit of the company.
First of all we will identify the X's of the products:
X1 be produced amount of Ammonia
X2 be produced amount of Ammonium Phosphate
X3 produced Ammonium Nitrate
X4 produced amount of Urea
X5 produced Hydrofluoric acid amount
X6 produced amount of Chlorine
X7 produced amount of Caustic soda
X8 produced Vinyl chloride monomer
Table below show the contribution of the profit and overhead for each product which will help us in concluding the objective function.
Table 1 contribution to profit and overhead
Vinyl chloride monomer
For 20% natural gas curtailment
Objective function will be.
Maximize profit 80 X1 +120 X2 +140 X3 +140 X4 +90 X5 +70 X6+60 X7 +90 X8
Before writing the constraints, we should take the percentage or capacity under consideration as the table below shows the percentage of the capacity of each product.
Table 2 operational data
Production Rate (%of capacity)
Natural gas consumption
(1,000 cu. ft./ ton
Vinyl chloride monomer
Calculation for the natural gas capacity
Vinyl chloride monomer:
85,680 cu. ft. x 103 is the Natural gas current usage is per day. The range Enerco projects curtailments is from 20 to 40 percent, so 20% from
85,680 = , then subtract it from 85,680= 68,544 cu. ft. x 103 per day.
X1 ≤1200, X2 ≤540, X3 ≤490, X4 ≤160
X5 ≤560, X6 ≤1200, X7 ≤1280, X8 ≤840
8 X1 +10 X2 +12 X3 +12 X4 +7 X5 +18 X6 +20 X7 +14 X8 ≤68,544
-20955173659900The figures below show the results by using QM. First, we chose linear program then we chose 9 constraints and 8 variables, then we inserted the data to the QM table.
Results for 20% natural gas curtailment.
After inserting the data, we pressed the Solve button to solve the linear program problem; the figure below shows the result of the case study.
The optimal solution for the natural gas is.
X1 =1200 ton /day, X2 =540 ton /day X3 =490 ton/day
X4 =160 ton/day X5 =560 ton/day X6 =1200 ton /day
X7 =423.2 ton /day X8 =840 ton /day z = 487,192 ton /day
We can see that there is reduction in production of caustic soda from 1200 to 423.2 tons /day.
40% curtailment of natural gas.
Maximizing profit 80 X1 +120 X2 +140 X3 +140 X4 +90 X5 ...
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