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Min C C C C T at at A (NT +1.2 Q) Q: Assignment 2

This document describes the methodology for Assignment 2, which involves minimizing the cost of refined oil. It is an unconstrained multivariate minimization problem with variables including refinery capacity (q) and tanker size (t). A MATLAB solver using the Nelder-Mead simplex algorithm was used to find the minimum, which occurred at q = 1.7956*105 bbl/day and t = 4.4638*105 kL, with a cost of $17.8799. Plotting the cost function versus q and t confirmed this was the global minimum within the ranges investigated. The cost function was determined to be monotonically increasing for large positive values of q and t, with the minimum cost of refined oil

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42 views1 page

Min C C C C T at at A (NT +1.2 Q) Q: Assignment 2

This document describes the methodology for Assignment 2, which involves minimizing the cost of refined oil. It is an unconstrained multivariate minimization problem with variables including refinery capacity (q) and tanker size (t). A MATLAB solver using the Nelder-Mead simplex algorithm was used to find the minimum, which occurred at q = 1.7956*105 bbl/day and t = 4.4638*105 kL, with a cost of $17.8799. Plotting the cost function versus q and t confirmed this was the global minimum within the ranges investigated. The cost function was determined to be monotonically increasing for large positive values of q and t, with the minimum cost of refined oil

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421250
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© © All Rights Reserved
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Assignment 2

Methodology
Min c=c c + ci + c x +

4
0.7952
+1.813ip ( nt+1.2 q )0.861 4.2510
2.09104 t 0.3017 1.064106 a t 0.4925 4.24210 a t
+
+
+
360
52.47 q(60)
52.47 q(360)
52.4

Parameters: a is the annual fixed charges fraction (0.20),


ci

, insurance cost (0.50 $/kL),

cx

cc

crude oil prices (12.50 $/kL),

, custom cost (0.90 $/kL),i interest cost (0.10),

n number of ports (2), p land prices (7000 $/m)


Vary: Refinery Capacity, refinery capacity, q ( bbl/day), Tanker size, t (kL)
This problem is clearly an unconstrained multivariate minimization problem. (However, it is
noted that there were trivial constraints such as q and t must be positive real number which
were not specify explicitly in the solver.) A MATLAB pre-defined solver (fminsearch) that
uses a Nelder-Mead simplex algorithm was used to solve this optimization problem. An
100

initial guess of q = 10 and t = 10 was used with a function tolerance of 10

. Based on

figure 1, fminsearch is able to converge to a local minimum with 121 iterations (q =


1.7956*105 bbl/day and t = 4.4638*105 kL, c = 17.8799).
To verify that this solution is indeed the best solution (for t>0, q>0), a plot 3-D plot of cost
function w.r.t to refinery capacity and tanker size were plotted from (t,q = 0 to 1*106). It
could be observed from the graph, when t and q are within the range investigated; the
function has only one local minimum. In addition, careful analysis of the cost function
reveals that as q and t is large (above 106) and is of similar magnitude, the cost function could
be approximated to be:
0.1049 q 0.671
Min c=c c +ci +c x +
360
This is clearly a monotonic increasing function and therefore, it could concluded that for the a
positive t and q domains, the minimum cost of the refined oil (dollars per litre) is
approximately $17.88.

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