Optimizing Mazut Distribution Networks for Minimizing Transportation Costs: A Scenario-Based Approach

Abstract

Efficient transportation infrastructure plays a pivotal role in any nation's development, and the petroleum industry holds particular significance in Iran's economic landscape. The transportation of petroleum products stands as a critical component of this industry, directly impacting various facets of the economy. Reducing traffic congestion not only alleviates strain on infrastructure but also mitigates traffic-related risks, air pollution, and transport expenditures. This, in turn, empowers the government to allocate savings to other sectors and bolster exports to neighboring countries. This research employs a linear optimization model to analyze the transportation of petroleum products, specifically Mazut, within Iran. By employing a scenario-based approach, we compare transportation costs in two distinct scenarios: one involving the utilization of Swap trades and the other focusing on increasing internal refinery production to supply Northern provinces without Swap transactions. We meticulously calculate transportation costs, leveraging TORA software and considering supply-demand dynamics. Our findings reveal that the implementation of Swap transactions yields an annual 2% reduction in transportation costs for Mazut products. This substantial cost-saving underscores the imperative nature of embracing Swap strategies within the country's petroleum distribution network.