Int. J. Oil, Gas and Coal Technology, Vol. 5, No. 1, 2012 29 Copyright © 2012 Inderscience Enterprises Ltd. An analysis of inaccuracy in pipeline construction cost estimation Zhenhua Rui*, Paul A. Metz and Gang Chen Department of Mining and Geological Engineering, University of Alaska Fairbanks, Duckering Building 418, P.O. Box 750708, Fairbanks, Alaska, 99775, USA Fax: +1-907-474-6635 E-mail: zhenhuarui@gmail.com E-mail: pametz@alaska.edu E-mail: gchen@alaska.edu *Corresponding author Abstract: 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 cost; cost overrun; cost estimation. Reference to this paper should be made as follows: Rui, Z., Metz, P.A. and Chen, G. (2012) ‘An analysis of inaccuracy in pipeline construction cost estimation’, Int. J. Oil, Gas and Coal Technology, Vol. 5, No. 1, pp.29–46. Biographical notes: Zhenhua Rui is a PhD candidate in Energy Engineering Management and MBA student at the University of Alaska Fairbanks. He also received his Master’s degree in Petroleum Engineering from the same university, in addition to his Master’s degree in Geophysics from China University of Petroleum, Beijing. His current research is the Engineering Economics of the Alaska In-state Natural Gas Pipeline. Paul A. Metz is a Professor of Department of Mining and Geological Engineering at the University of Alaska Fairbanks. He received his PhD from Imperial College of Science Technology and Medicine. He also received his MS in Economic Geology and MBA from the University of Alaska. His research interest include: market and transportation analysis of mineral resources; analysis of transport systems; engineering geological mapping and site investigation; mineral and energy resource evaluation.