Reference no: EM132241380

The Conch Oil company needs to transport a total of 30 million barrels of crude oil from a port in Doha, Qatar in the Persian Gulf to three refineries throughout Europe. The refineries are in Rotterdam (Netherlands), Toulon (France), and Palermo (Italy). The oil can be transported to the refineries in different ways. First, it may be shipped directly to the refineries on supertankers traveling around Africa at costs of $1.20, $1.40 and $1.35 per barrel, respectively. Conch is contractually obligated to send at least 25% of its total oil via these supertankers. Alternatively, oil may be shipped from Doha to Suez, Egypt at a cost of $0.35 per barrel, and then through the Suez canal to Port Said at a cost of $0.20 per barrel, and then from Port Said to Rotterdam, Toulon and Palermo at per-barrel costs of $0.27, $0.23, and $0.19 respectively. Finally, Oil from Suez can be sent via pipeline to Dalmietta (Egypt) at a cost of $0.16 per barrel. From Dalmietta, it can be shipped to Rotterdam, Toulon and Palermo at cots of $0,25, $0.20, and $0.15 respectively. The pipeline between Suez and Dalmietta can be used to ship a maximum of 15 million barrels. Show how this problem can be modeled as a network model. Provide the network diagram and a detailed explanation of your model. Determine how Conch Oil can transport the 30 million barrels at the lowest cost. How would the optimal cost change if Conch Oil’s obligation to use the supertankers changes? Specifically, try varying this parameter from 10% to 50%, in steps of 10%. Explain the reason for the changes in the optimal cost

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