Optimization of the Risk-Based Small-Scale Lng Supply Chain in the Indonesian Archipelago

The electricity supply in Indonesia is believed to be inefficient and this was indicated by the increase in the Cost of Generation Provision (CGP) in the 2016-2021 period. There are also approximately 30 Gas Power Plants/Gas Engine Power Plants using HSD fuel which costs 38% more than LNG. It was further observed that the need for HSD is low as indicated by the 2.28 BBTUD. The magnitude of the risk in the Small-Scale LNG (SS-LNG) supply chain with low demand was also discovered to be causing certain inefficiencies. Therefore, this study aims to develop an economical risk-based small-scale supply chain model to distribute LNG in archipelago areas to minimize infrastructural costs, including investment and operational. This study also formulates a risk-based SS-LNG model that accommodates demand uncertainty and continuous routes (milk run), which are still rarely applied in LNG supply chains, thus impacting the cost efficiency and sustainability of LNG supply in the archipelago. The simulation was conducted using the vehicle routing problem with milk run (VRPMR) method. The optimization results showed that the 2 vessels scheme is the optimal and efficient risk-based small-scale LNG supply chain model. However, it was observed that the change in the scheme from 1 to 2 vessels generally increased the infrastructure tariffs by 3% or USD 0.11 per MMBTU. This risk-based supply chain model is able to ensure a fuel cost efficiency of 27% for power plants