Mathematical Program for Optimal Procurement of Liquefied Natural Gas Cargos with Split Deliveries

The steady growth in the demand for liquified natural gas (LNG) as a transition fuel has resulted in an increase in its trade all along. Consequently, there have been various innovations in its trade and transportation. There are opportunities for an LNG importer that is currently using only long-term contracts to source LNG to optimize their costs by utilizing short-term opportunities in the spot market. Previously, we had proposed a mathematical model to identify an optimal procurement strategy that considers existing ongoing long-term contracts and spot market cargos. We extend the model in this work and incorporate split delivery, an innovation that has been recently introduced in LNG transportation, which enables further operational flexibility. We propose a mixed-integer linear programming model that utilizes split deliveries to reduce the overall procurement costs for a set of terminals. Over a set of scenarios, the proposed model saved, on average, $1269.5 million over a 12-month period when split deliveries are included as an option. We also propose two benefit allocation schemes: one based on the well-known Shapley value and another simpler one to fairly distribute the savings among the terminals. These ensure that every terminal would gain by participating in a coalition for split deliveries.