The Influence of Risk Analysis on the Economics of Carbon Steel and CRA Clad Flowlines

Abstract

Abstract Recently a method was presented to assist in making the decision to install corrosion resistant alloy (CRA) pipelines or inhibited carbon steel. This method incorporated risk into the decision process. Previous economic analyses comparing solid and clad CRA pipelines to those constructed from inhibited carbon steel have only taken into account the costs for each option without considering theprobability or cost of failure. This paper extends the earlier work by examining the effects of varying the assumed probability of failure of the clad pipeline and introducing utility effects. Introduction The need to transport unprocessed corrosive multiphase well streams has increased interest in clad CRA flowlines as an alternative to installing inhibited carbon steel. Handling unprocessed corrosive fluids then raises the issues of reliability, safety, and the costs of possible failures. Although the initial capital costs of a clad pipeline are quite high, the subsequent operating cost over the life of the project are relatively low. The opposite is true for carbon steel where relatively low initial costs may be coupled with significant operating and repair costs. For this reason, a life cycle cost analysis provides a better measure of the overall costs of clad versus carbon steel flowlines. Earlier work1 incorporating a life cycle approach indicated that at long lengths, typically greater than 8 km (5 miles) and with increasing diameter, the net present value (NPV) cost for clad and duplex stainless steel (DSS) pipelines was higher and quickly diverged from carbon steel. However, more recent work2 demonstrated that at shorter line lengths the curves for NPV cost crossed and the clad and DSS pipe were more economic. Moreover, when risk was included in the analysis, the economics were found to depend largely on the probability of failure and the cost implications offailure. A curve was developed that represented the expected monetary value (EMV)ndifference between installing carbon steel and clad steel at assumed values for the NPV cost of carbon steel failure (or failures) and the probability of failure (POF) for carbon steel, Figure 1. For these cases the clad POF and the NPV cost of all clad failures was assumed to be 1'A and $25 million respectively. For example, if the NPV cost of all carbon steel failures during the life of a flowline (i.e. lost or deferred production and revenues, cost of repairs, environmental damage and fines, etc.) and the probability of carbon steel failure result in a point above the EMV indifference line, then clad flowlines should be installed. Likewise, Figure 2shows the same series of curves for different line lengths. As noted, these curves ofindifference do not consider a variable POF for the clad case nor do they consider a variable discount factor or the utility concept of money. All of these new factors are considered in this paper. Impact of Assumed Clad Probability of Failure To demonstrate the sensitivity of the 1'Aassumption for the probability of clad failure, a series of curves representing an assumed value for the NPV cost of carbon steel failure(s) were developed.