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THE ROLE OF THE INDEPENDENT ENGINEER IN PIPELINE PROJECT FINANCING

IP.com Disclosure Number: IPCOM000217683D
Publication Date: 2012-May-10
Document File: 6 page(s) / 404K

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The IP.com Prior Art Database

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Proposed Article for Publication in Pipeline & Gas Journal

THE ROLE OF THE INDEPENDENT ENGINEER IN PIPELINE PROJECT FINANCING

        Paul D. Hein
Manager, ECS Business Development

     KBR
601 Jefferson Street

      Houston, Texas 77002-7990
T: 713-753-6606, E: paul.hein@halliburton.com

Travis E. Stripling, RE., Ph.D.

Project Manager

     KBR
601 Jefferson Street
Houston, Texas 77002-7990
T: 713-753-7856, E: travis.stdpling@halliburton.com

DuVal F. Dickey, Jr., P.E.

Project Manager KBR
601 Jefferson Street

       Houston, Texas 77002-7990
T: 713-753-7588, E: duval.dickey@hallibudon.com

ABSTIZACT

   It is increasingly important for Lenders and BolTowcrs alike to fully understand the risks to winch they arc exposing themselves in pipeline project financing. In this paper, we explore the role of the Independent Engineer in identifying and mitigating these risks and will provide suggestions on how prospective investors are able to maximize the value of this mle during all stages of the pipeline project financing process.

   This paper describes the Independent Engineers role, encompassing the services required to manago the pre-closure, construction and f'mancing period of a new pipeline project, and due diligenco of existing assets. We explain hnw this role differs from other engineering roles on a pipeline project, and, in particular, how the Independent Engineer is primarily focused on the identification and management of risk.

   For any project financing, the key elements are the underlying project fundamentals. Winle there arc usually firm contractual remedies to offset a default by any project party,

Lenders require the commercial basis for the project to also be sound.

   To adequately identify the commercial basis for a pipeline project, the Independent Engineer typically carries out an assessment of the key elements in the project. These may include a complete "product to market" assessment, a review of project technology, construction methodology, and operability and reliability. The work focuses strongly on reconciling the financial model with the cxpoctcd performance of the investment. It is also important thaL although inghly technical issues may be evaluated, the presentation of the information is clear and easily understood by non-technical readers

In this paper, we use ease studies to demonstrate the key elements in pipeline sector financing from KBR's perspective as an Independent Engineer, and provide adviee for all project stakeholders on why this information is required, and how best to maximize the value of the Independent Engineer.

INTRODUCTION

   Fundamental to any pipeline investment decision is an assessment of risk associated with the investment This includes an assessment of potential exposure, and the magnitude and probability of this exposure. Gencml project management literature, for example References [1] thru [4], more exactly provides the definition of project risk and the project risk management process. In many cases, this risk is associated with the...