Abstract

When facing pipeline replacement decisions, asset managers face a dilemma. Factual information about the condition of the pipelines allows better replacement decisions and capital efficiency gains. On the other hand, gathering this information is costly. Performing a cost-benefit analysis is also challenging, as the benefits are difficult to project. This paper models the financial impact of pipeline condition assessment by considering the financial risk associated with decision making errors. An economic optimization equation using the model is presented. This equation yields the Economic Assessment Level: the amount of condition information needed to minimize the total combined spending on information gathering and incorrect decisions. Case studies and examples of the impact of different levels of information gathering are presented. The results of these programs are compared with the predictions of the model, illustrating how the calculations can be used to improve capital improvement program efficiency real world situations.

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