Life Cycle Costing - are Duplex Stainless Steel Pipelines the Cost-Effective Choice?
Authors: Smith L.M. , Celant M. 
Published: October 2008

Increasingly the selection of materials is being made not simply on what is the lowest initial installed cost, but on a longer term view of the costs incurred for the duration of a project. This Life Cycle Costing (LCC) approach utilises established accounting methods to compare the costs of alternative materials selections by calculating the 'present day value' of future costs associated with the chosen materials.

This approach is illustrated by reference to the literature including examples of down hole tubing, seawater piping and flowlines. Further examples are given for oil and gas flowlines and a production manifold which also illustrates the use of decision trees in making LCC decisions when there is more than one outcome for a possible material option.

WHY USE LIFE CYCLE COSTING FOR MATERIALS SELECTION?

The selection of a material for a pipeline or flowline requires a compromise between optimum corrosion resistance, required mechanical properties, fabric ability, availability and cost. It may often be the case that a final choice has to be made between two or more optional materials which may differ in the extent to which they meet all the desired service requirementsfor the anticipated required lifetime of the project.

In the extreme cases where corrosion risks are eithernegligible or very severe, materials selection is fairly simple and a typical choice will be carbon steel or corrosion resistant alloys respectively.

It is in the intermediate cases of moderate corrosivity where a final material choice may lie between carbon steel with corrosion allowance and coating or inhibitor protection or various corrosion resistant alloy options. In this case, past practice may have been to select the option which requires the least capital expenditure.

Increasingly, however, the selection of materials is being made not simply on what is immediately the cheapest technically acceptable option, but on a longer term view of the costs incurred for the duration of a roject. This Life Cycle Costing (LCC) approach utilises established accounting methods to compare the costs of alternative materials selections by calculating the 'present day value' of future costs associated with the chosen materials. By using LCC it can often be demonstrated that paying out more at the start for corrosion resistant alloys, including duplex stainless steels, rather than an apparently much cheaper material, results in substantial savings in operating, maintenance and repair costs in the future.

One of the key benefits of using LCC in a comprehensive way is that it obliges the user to take a global view of the issue in question and not to solve a single problem in isolation of all the other factors which are affected or may affect the decision making process.

THE METHOD OF LIFE CYCLE COSTING

Life cycle costing (LCC) is a technique developed for identifying and quantifying all costs, initial and ongoing, associated with a project or installation over a given period of time. LCC uses the standard accountancy principle of discounted cash flow so that total costs incurred during the life cycle period are reduced to present day values.