Inderscience Publishers

An analysis of inaccuracy in pipeline construction cost estimation

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The aim of this paper is to investigate cost overrun of pipeline projects. A total of 412 pipeline projects between 1992 and 2008 have been collected, including material cost, labour cost, miscellaneous cost, right of way (ROW) cost, total cost, pipeline diameter, pipeline length, pipeline's location, and year of completion. Statistical methods are used to identify the distribution of the cost overrun and the causes for overruns. The overall average cost overrun rates of pipeline material, labour, miscellaneous, ROW and total costs are 4.9%, 22.4%, -0.9%, 9.1% and 6.5% respectively. The cost estimation of pipeline cost components are biased except for total cost. In addition, the cost error of underestimated pipeline construction components is generally larger than that of overestimated pipeline construction components except total cost. Results of analysis show that pipeline size, capacity, diameter, length, location, and year of completion have different impacts on cost overrun of construction cost components. [Received: May 26, 2011; Accepted: June 28, 2011]

Keywords: pipeline costs, cost overrun, cost estimation, pipeline construction, onshore pipelines, oil and gas

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