Valuating Hydrocarbon Pipeline Facility Service Beyond 20--25 Year Economic Life
Accounting for Residual Value
Keywords:economic life, investment decision, life cycle cost, pipelines, project profitability, residual life
The 20--25 years economic life for hydrocarbon pipelines in the investment decision model is at wide variance with historical statistical records of more than 90-percent world-wide. Opinions diverge, from service type to the product quality, and materials resilience as basis for this premise. While, financial experts consider time to fully depreciate a capital investment, irrespective of the rate of returns, engineers consider operational availability and reliability duration. The risk is that actual residue values of pipelines worldwide are erroneously omitted in every project’s economics Cash-flow computation, thus eroding the investment decision quality. Statistics showed that more than 60-percent of pipelines worldwide have already exceeded the 25 years economic life, while more than 40-percent have operated more than 30-years and above. This theoretical appraisal identified a gap in the economic model in handling multi-criteria risk management uncertainties like hedging, weighting, etc., and highlighted the exigency to craft and assign numeric residue values for pipelines in the investment Cash-flow models.
Copyright (c) 2021 Nigerian Journal of Technology
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The contents of the articles are the sole opinion of the author(s) and not of NIJOTECH.
NIJOTECH allows open access for distribution of the published articles in any media so long as whole (not part) of articles are distributed.
A copyright and statement of originality documents will need to be filled out clearly and signed prior to publication of an accepted article. The Copyright form can be downloaded from http://nijotech.com/downloads/COPYRIGHT%20FORM.pdf while the Statement of Originality is in http://nijotech.com/downloads/Statement%20of%20Originality.pdf
For articles that were developed from funded research, a clear acknowledgement of such support should be mentioned in the article with relevant references. Authors are expected to provide complete information on the sponsorship and intellectual property rights of the article together with all exceptions.
It is forbidden to publish the same research report in more than one journal.