Several stakeholders are involved in building and operating a pipeline including both us- ers and non-users of the pipeline system. Either directly or indirectly, these stakeholders have an interest in the pipeline system. The users may include the shippers on the pipe- line system as well as the owner and operating company. Non-users of the system are land owners, the general public, environmentalists and multiple levels of governments. Other non-users may include users of other transportation modes, such as trucking and railroad companies, whose business could be directly affected by the pipeline system. Some of the non-users such as land owners have an economic interest, but others such as the general public may not be directly involved in the development of the system. However, labor unions and/or environmentalists might show opposing interests to the project; citing economic impacts vs. potential adverse consequences due to changes in the socio-economic and natural environment. Governments, through their regulatory agencies, make a decision by balancing the views of all of the stakeholders based on sound engineering and economic merits. Therefore, an unbiased economic study includ- ing an environmental assessment is necessary to satisfy all the stakeholders.
For a new pipeline system, an economic study is necessary to provide a measure of economic benefits for not only shippers and pipeline companies but also other key stakeholders. The study must justify the need of a new pipeline system to satisfy the en- ergy requirements in new markets. The study assesses the project feasibility, financing requirements, and optimum system design and operation. If the pipeline is of strategic importance for a country or a certain region, the assessment of the project feasibility may not be critical. However, the need for a new pipeline or a major expansion of an existing system can be justified through an economic analysis. The economic study covers the financing requirements that may include the project profitability, amounts of
financing and their payment schedule. It also includes preliminary design and operation, all costs, and comparative analysis of the capital costs along with the operating costs as well as the proposed tariff structure in the case of a cost recovered public utility.
A pipeline economic analysis includes a process of optimizing the pipeline sys- tem, determining an optimum pipe size and pumping requirements over the life of the project life. The economic study may include key, not necessarily all, design factors discussed above. The optimizing process involves achieving a desired level of profit- ability, balancing the capital costs including material and construction against the op- erating costs. During the process, due considerations should be given to design factors that are suitable for operating the pipeline system safely and economically.
The performance of an economic study is beyond the scope of this book, so no attempt is made to discuss an economic analysis and tariff structures. However, some of the major cost factors are discussed in this section because they influence pipeline system design greatly and will be referred to again in the subsequent chapters:
Mechanical factors ·
1. Pipe grade, pipe size or diameter, and wall thickness 2. Pipeline route and depth of cover
Capacity factors ·
1. Operating parameters
2. Station spacing and pumping costs Reliability and safety factors
·
1. Valve spacing
2. Other valve-related costs
3.2.2.6.1 Pipe Grade, Size, and Wall Thickness It is critical to optimize the pipe
grade, diameter, and wall thickness to minimize the project cost. The pipe cost is based on the grade, diameter, and wall thickness. For most pipeline systems, the pipe cost is the highest material cost. In addition, these three factors have a direct effect on the cost of installation. Pipeline economics begins with the selection of the pipe material. Since pipe material for transmission lines is steel, it boils down to the selection of pipe grade. Higher grade steels are more costly to produce and because of their chemical composition require specific welding procedures. Nevertheless they do result in thin- ner pipe wall hence less steel tonnage, lower transportation costs, and reduced amounts of welding. A case specific study is needed to determine if such steels are the optimal solution to a given project.
One common economic decision is whether to construct a large line initially, or put in a smaller line first and parallel it or add pumps at a later time. Once the need for a pipeline system is recognized, the maximum pipe size is determined such that it can be economically optimized. The larger the pipe size, the larger the carrying capacity and the lower unit shipping costs. The pipeline capacity increases approximately by 5/2 power for a fixed pressure drop, but the pipe material cost increases significantly and construction costs increase almost linearly as the size is increased.
The design pressure is directly proportional to pipe wall thickness for the same grade and size. The larger the wall thickness for a given pipe size, the higher the design pressure. The larger the wall thickness, the higher the pipe and construction costs. Higher grade pipe requires thinner pipe wall for the same design pressure, resulting in lower steel weight and reduced cost even though higher pipe grade costs more per ton. Cost savings can also result from reduced construction costs.
3.2.2.6.2 Pipeline Route Both direct and indirect costs due to time delays have to
be taken into account in selecting a pipeline route. As noted earlier the costs of select- ing a pipeline route are related to pipeline length, terrain features, intermediate supply
and delivery locations, cost and restrictions on facilities and land, and permitting re- quirements. If possible, a straight line is selected to minimize the pipe cost, and severe mountainous terrains are avoided because of high construction, pumping and mainte- nance cost requirements. Obtaining right-of-ways for certain portions of the route can be difficult or even impossible due to environmental restrictions or land claims.
The determination of pipeline location must take account of population density, as well as the proximity of features such as roads, railways, rivers, lakes, unusually sensi- tive areas, etc. The route should be evaluated in terms of the safety and environmental issues, accessibility, extra material requirements, land claims, etc. Also, the locations of facilities have a direct influence on construction cost.
The minimum depth of cover from a safety standpoint is specified in the applicable codes and standards. However, the operational requirement depends on the tempera- ture condition and thus varies along the pipeline route, particularly for long pipelines. The effect of depth on the installation and labour cost component is largely dependent upon the burial depth, soil conditions and location. Extra labour, material and/or equip- ment costs are incurred for conditions such as rocky ground, soft ground, e.g., muskeg, river beds, roadbeds, railway crossings, etc.
3.2.2.6.3 Operating Parameters No extra cost is associated with the flow rate
because the design is based on it. Since operating pressures are based on maximum allowable operating stress levels of pipe grade, pipe size and wall thickness, and class location factors, a range of design pressures is available in the design phases. If higher operating pressure is selected, the station spacing is increased, resulting in lower mate- rial and energy costs.
If the fluid viscosity is sensitive to temperature, the major cost items could be the provision of heaters and heating, pipe insulation, and/or a blending operation.
3.2.2.6.4 Station Spacing and Pumping Costs Station spacing is determined by
factors such as pipe size, flow profiles, hydraulics and elevation profile, and capital and operating costs. In an environment of high energy cost or rapid increase in flow, the option with a larger pipe size is preferred, even though its capital cost is higher than that of a smaller size. For a given flow profile, the larger the pipe size, the longer the station spacing. The longer the station spacing, the lower the capital costs associated with station construction and the pumping cost associated with power and energy.
3.2.2.6.5 Valve Spacing Valves are significant cost items. Placement of valves
provides for effective control of pressure or flow; sectionalizing the system in case of emergency, isolation of components of the system, etc. The minimum valve spacing and operation requirements are specified in the applicable codes and standards. The number and locations are determined by such factors as system layout, product, adja- cent population density, proximity to river crossings, etc.
3.2.2.6.6 Other Valve-Related Costs Other valve related costs have to be consid-
ered for safety in certain designs: namely, the need for and location of pressure-reducing valves and pressure relief valves. The latter is discussed in Section 5.1.3 Surge Control.
3.2.2.6.7 Pressure-Reducing Station (PRS) A pressure-reducing station (PRS) is
usually installed to reduce the back pressure of a pipeline if the pipeline is sloping down severely. This is due to the static pressure increase beyond the MAOP caused by the elevation gain on the downstream side (refer to Section 3.3.3). A PRS is installed to maintain the downstream pressure below the MAOP, independent of the upstream pressure, unless the upstream pressure becomes less than the downstream pressure set point. Through the downstream pressure controlling process, the upstream pressure can be increased. The installation of a PRS has both cost and operation implications; a PRS requires not only various types of valves including a relief valve and relief tank but also a pig trap and launcher pair. An example of a PRS operation is discussed in Section 5.1.4.
Major capital costs are 30% to 40% of the total capital cost in material, 35% to 50% in labor and construction, 5% to 10% in right of way, and 12% to 15% in miscel- laneous items. The materials include pipe, pump stations, valves and fittings, meter stations, SCADA and telecommunication equipment, and tanks and manifold piping, while the miscellaneous items include engineering, surveying, administration, regula- tory filing, freight, taxes, etc. Among the major operating costs, general and adminis- tration costs such as payroll is the largest, and power and energy cost the next largest. The rest are SCADA and telecommunication costs, utility costs, lease costs such as ROW easements, office buildings, etc.