OPERATIONS RESEARCH

ASSIGNMENT -2

PROBLEM 11 : ELK HILLS OIL

FIELD

Submitted By:
(Group 11)
UM15157 - Pratik Agarwal
UM15164 - Rosali
Pujapanda
UM15143 - Gourav
Upadhyaya
UM15149 - Kumar Gaurav
Behera
UM15141 - Diksha Roy

PROBLEM DEFINITION:

The Elk Hills oil field has a majority ownership (80%) by the U.S. Federal
Government. The Department of Energy (DOE) is authorized by law to sell
the governments share of the oil produced to the highest qualified
bidders.

At the same time, the law limits the quantity of oil delivered to any one
bidder.

The oil field has six delivery points with different production
capacities (bbl/day). The amounts of daily production (in bbl/day) at each
of the delivery points are presented daily as line items, and a bidder may
submit bids on any number of line items.

DOE collects the bids and evaluates them, starting with line item 1 and
terminating with line item 6, awarding delivery to the highest bidder
but taking into account the caps set by law on the quantity of oil
any one bidder can receive.

To be specific, the table provides a summary of bonus prices bid on a certain

day. A bonus is an increment over the highest price offered for similar grade
oil produced in the delivery point area. No bidder can receive more than
20% of the total daily production of 180,000 bbl from all delivery
points.

DATA GIVEN(MODEL PARAMETERS):

Bonus in $/bbl bid by bidder
Line
Item

Product
ion
(1000
bbl/day)

1.10

0.99

1.20

1.10

0.95

1.00

1.05

1.02 20

1.05

1.02

1.12

1.08

1.09

1.06

1.11

1.07 30

1.00

0.95

0.97

0.94

0.93

1.01

1.02

0.98 25

1.30

1.25

1.31

1.27

1.28

1.26

1.32

1.32 40

1.09

1.12

1.15

1.07

1.08

1.11

1.05

1.10 35

0.89

0.87

0.90

0.86

0.85

0.91

0.88

0.91 30

MODEL EXPLAINED:
Bonus in $/bbl bid by
bidder
Lin
e
Ite
m

1.1
0

2
0
1 1.2
0.99
6 0

1.10 0.9
5

1.0
5

1.02 1.1
2

1.0
0

1.3
0

Productio
n
(1000
bbl/day)

1.01 1.0
0 4 5

1.0
2

20

1.08 1.0
9

1.0
6

1.1
1

1.0
7

30

0.95 0.9
7

0.94 0.9
3

1.0
1

1.0
2

0.9
8

25

1.25 1.3
1

1.27 1.2
8

1.2
6

1.3
2

1.3
2

40

Total
Allocatio
ns
= 20
=
16+14=30

1.0 1.12 1.1 1.07 1.0 1.1 1.0 1.1 35

9
5
1 bidder
5
0= 20% of 180000 =
Maximum
Allocation
to8 each
636000
0.8 bbl/day
0.87 0.9 0.86 0.8 0.9 0.8 0.9 30
9
0
5
1
8
1

ANALYSIS & DECISION

VARIABLES
Demand constraints(min - 0,
max - 36)
for each bidder

Maximization
Transportation Problem

Bonus in $/bbl bid by

bidder
Lin
e
Ite
m

Productio
n
(1000
bbl/day)

X11 X12

X13 X14

X15 X16 X17 X18 20

X21 X22

X23 X24

X25 X26 X27 X28 30

X31 X32

X33 X34

X35 X36 X37 X38 25

X41 X42

X43 X44

X45 X46 X47 X48 40

X51 X52

X53 X54

X55 X56 X57 X58 35

Supply
constrain
ts

6
X61 X62 X63 X64 X65 X66 X67 X68 30
Decision Variables are the awarded production amounts to the
bidders for a particular line item delivery corresponding to Xij
for i=1,2,..6(line items),j=1,2,8(bidder nos)

MODEL FORMULATION:
Objective
Maximize Z(Total Daily Revenue for the Government) where
Z= X11*C11+X12*C12++X68*C68
Subject to
X11+X12+X13+.X18<=20, X11+X21+X31+.X61>=0&<=36
X21+X22+X23+.X28<=30,
X12+X22+X32+.X62>=0&<=36
X31+X32+X33+.X38<=25,

X13+X23+X33+.X63>=0&<=36

X41+X42+X43+.X48<=40,

X14+X24+X34+.X64>=0&<=36

X51+X52+X53+.X58<=35,

X15+X25+X35+.X65>=0&<=36

X61+X62+X63+.X68<=30,

X16+X26+X36+

.X66>=0&<=36
And Xij>=0 where i=1,2,6

X17+X27+X37+.X67>=0&<=36

and j=1,2,8(non-negativity constraints) X18+X28+X38+.X68>=0&<=36

SOLUTION USING EXCEL

SOLVER:
REVENUE BY 20% LIMIT
0

20

16

14

18

36

35

30

Maximum Daily
Revenue
Z=202.18
(in 1000 $/day)

REVENUE BY ADJUSTED LIMITS

Limit
Max allocation
to each
bidder(in 1000
bbl/day)
Revenue
Generated(in
1000$/day)

15%

20%

25%

27

36

45

201.4

202.18

202.75

CONCLUSION
Revenue Generated Increases with the increase in limit of
maximum
Allocation to each bidder
Hence the Government can do better by increasing the
limit of allocation to 25%