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PRIORITIZATION OF REPUTATION LOSS FACTOR SUBJECT TO PIPELINE EXPLOSION FROM PUBLIC PERCEPTIONS NURHIDAYAH BINTI IDRIS UNIVERSITI TEKNOLOGI MALAYSIA

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PRIORITIZATION OF REPUTATION LOSS FACTOR SUBJECT TO

PIPELINE EXPLOSION FROM PUBLIC PERCEPTIONS

NURHIDAYAH BINTI IDRIS

UNIVERSITI TEKNOLOGI MALAYSIA

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PRIORITIZATION OF REPUTATION LOSS FACTOR SUBJECT TO PIPELINE

EXPLOSION FROM PUBLIC PERCEPTIONS

NURHIDAYAH BINTI IDRIS

A project report submitted in partial fulfillment of the

requirements for the award of the degree of

Master of Engineering (Construction Management)

Faculty of Civil Engineering

Universiti Teknologi Malaysia

JANUARI 2018

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With lots of love to my husband, Ibrahim bin Abdul Halim

My daughter, Maryam Humaira’ binti Ibrahim

My mother, Kamisah binti Salam

My father, Idris bin Markom

My mother in-law Siti Nor binti Daud

My family members,

Mardiana, Mukmin, Hafezuddin, Saliha, Nurain Fadilah

My Nieces..Aliyah, Naufal, Nufail, Syauwal

My in laws members,

Abe Long, Kak Long, Abe Bi, Kak Anis, Abe Nan, Kak Bani, Abe Jang, Kak Ikah,

Abe Ko, Kak Wahida, Adik Abe, Ngah, Bidin

My Nieces..Qiesya, Qayrin, Qalish, Adriana, Aryan, Jebat, Dija,

Mamat, Qalilullah, Abdullah, Khalaf

for always standing by my side…

To my supervisor, Dr. Libriati binti Zardasti

for her patience and countless helps

in guiding me to complete this dissertation

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ACKNOWLEDGEMENT

All praise and gratitude to Allah for His compassion to give me the strength

and patience to complete this project. Thank You Allah for give me this opportunity

to pass through this journey with many challenges and obstacles.

My deepest appreciation goes to my supervisor, Dr. Libriati binti Zardasti for

her patience, motivation, guidance and countless helps throughout the completion of

this research.

I am also very thankful to my beloved husband, Ibrahim bin Abdul Halim and

my daughter Maryam Humaira‟ binti Ibrahim, my parents and family members who

have supported me physically and mentally during my research. My appreciation

also goes to my fellow friends, for their motivation and support. Last but not least, I

am very thankful to all those who have helped me in various aspects throughout the

completion of my dissertation. May Allah reward all of you with goodness.

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ABSTRACT

The pipeline explosions events can cause many negative impacts such as

human losses, property damage/ losses, economic losses, environmental damage and

reputation loss to the pipeline‟s operator. Reputation is a major risk issue for all

organizations and needs to be considered alongside all other major risks such as

operational, strategic and financial risks. However, this reputation risk impact is

always not included in the risk assessment of pipeline damage because the risk

values were not obtained in monetary terms. The consequences of pipeline failure are

also influenced by reputational loss. Hence, it must be included and taken into

account in the consequences assessment of pipeline damage as well. This study

focuses on prioritizing the importance of the reputation loss factors according to the

public perceptions. Eight reputation loss factors were identified from 10 major latest

pipeline explosion post-accident case studies from previous study. Over 200

respondents were distributed with the online questionnaire survey form to rate the

importance level of reputation loss factors using Likert scale rating method. The

significance difference was obtained by the implementation of statistical analysis.

Analytical Hierarchy Process (AHP) method for prioritization process with the aid of

Super Decisions software was used to rank the priority vectors. Results show that the

factor P3 “Destroyed private properties” as the highest contributor to an operator‟s

reputation loss due to a pipeline accident. Hence, by all the prioritization, the

pipeline owner can apply the mitigation measures immediately according the factor

that formerly to be dealt with.

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ABSTRAK

Letupan paip boleh menyebabkan banyak kesan negatif seperti kematian,

kerosakan/ kerugian harta, kerugian ekonomi, kerosakan alam sekitar dan kehilangan

reputasi kepada pengendali saluran paip. Reputasi adalah isu risiko utama untuk

semua organisasi dan perlu dipertimbangkan bersama dengan semua risiko utama

seperti risiko operasi, strategik dan kewangan. Walau bagaimanapun, impak risiko

reputasi ini tidak termasuk dalam penilaian risiko kerosakan saluran paip kerana nilai

risiko tidak diperolehi dalam bentuk kewangan. Kegagalan saluran paip juga

dipengaruhi oleh kehilangan reputasi. Oleh itu, ia mesti dimasukkan dan diambil kira

dalam penilaian akibat kerosakan saluran paip juga. Kajian ini tertumpu kepada

faktor kehilangan reputasi mengikut persepsi orang awam. Lapan faktor kehilangan

reputasi telah dikenalpasti dari 10 kes letupan paip terkini malalui kajian terdahulu.

Lebih 200 responden telah diedarkan dengan borang kaji selidik dalam talian untuk

menilai tahap kepentingan faktor kehilangan reputasi menggunakan kaedah

penarafan skala Likert. Perbezaan penting antara faktor diperolehi dengan

menggunakan kaedah analisis statistik. Kaedah Proses Hierarki Analisis (AHP)

untuk proses keutamaan dengan bantuan perisian Super Decision telah digunakan

untuk menilai vektor keutamaan. Keputusan menunjukkan bahawa faktor P3

"Kehilangan harta persendirian" sebagai penyumbang tertinggi kepada kehilangan

reputasi operator saluran paip disebabkan kemalangan saluran paip. Oleh itu,

berdasarkan semua faktor mengikut keutamaan yang telah diperoleh, pemilik saluran

paip boleh menyediakan langkah-langkah pengurangan dan menangani risiko

kehilangan reputasi syarikat pengendali dengan cepat mengikut kepada faktor yang

telah disusun mengikut keutamaan.

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TABLE OF CONTENTS

CHAPTER TITLE PAGE

DECLARATION OF AUTHOR ii

DEDICATION iii

ACKNOWLEDGEMENT iv

ABSTRACT v

ABSTRAK vi

TABLE OF CONTENTS vii

LIST OF TABLES xi

LIST OF FIGURES xiii

LIST OF ABBREVIATIONS xv

LIST OF SYMBOLS xvii

LIST OF APPENDIX xviii

1 INTRODUCTION

1.1 Preface 1

1.2 Background Research 2

1.3 Research Problem 3

1.4 Research Aim and Objectives 4

1.5 Research Scope 5

1.6 Significance of Study 6

2 LITERATURE REVIEW

2.1 Introduction 7

2.2 Pipeline Transport System 8

2.3 Pipeline Accidents: An Overview 9

2.3.1 Pipeline Accident Definition 9

2.3.2 Pipeline Accidents Data Statistics 10

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2.3.3 Consequences Pipeline Failure 12

2.4 Pipeline Risk Assessment 13

2.5 Reputation 17

2.5.1 Definition of Reputation 17

2.5.2 Reputation Loss 19

2.6 Recent Major Onshore Pipeline Explosions

Cases (2006- 2014)

22

2.6.1 Pipeline Explosion Cases 2006 22

2.6.2 Pipeline Explosion Cases 2008 23

2.6.3 Pipeline Explosion Cases 2010 24

2.6.4 Pipeline Explosion Cases 2011 25

2.6.5 Pipeline Explosion Cases 2013 26

2.6.6 Pipeline Explosion Cases 2014 27

2.7 Prioritization of Reputation Loss Factors 30

2.7.1 Analytic Hierarchy Process (AHP) 30

2.8 Concluding Remarks 31

3 RESEARCH METHODOLOGY

3.1 Introduction 32

3.2 Brief Research Methodology 33

3.3 Data collection 34

3.3.1 Literature Review 34

3.3.2 Case Studies 35

3.3.3 Questionnaires 36

3.4 Data analysis 38

3.4.1 Frequency Analysis 38

3.4.2 Sample Size and Return Rate 39

3.4.3 Reliability Analysis 40

3.4.4 Mann-Whitney Test 41

3.4.5 Kruskal-Wallis Test 41

3.4.6 Average Index 42

3.4.7 Analytical Hierarchy Process 43

3.4.8 Super Decisions Software Method 44

3.5 Validation of prioritization reputation loss factors 46

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3.6 Concluding Remarks 47

4 RESULTS AND DISCUSSION

4.1 Introduction 49

4.2 Results to objective 1: Identification of Reputation

Loss Factors in Recent Pipeline Explosion Cases

50

4.2.1 Reliability Analysis 51

4.2.2 Sample Size and Return Rate 51

4.2.3 Result of Main Survey 52

4.2.3.1 Section A: Demographic 52

4.2.3.2 Section B: General Knowledge 54

4.2.3.3 Section C: Ranking of Factor from

Public Perspectives

59

4.2.3.4 Hypothesis Testing 59

4.3 Results to objective 2: Prioritization of Reputation

Loss Factor

61

4.3.1 Priority Vector 61

4.4 Results to objective 3: Validation of Prioritization

Reputation Loss Factor

62

4.5 Discussions 64

4.5.1 Identification Reputation Loss Factors in

Recent Case Studies

64

4.5.1.1 Reliability Analysis and Return

Rate

64

4.5.2 Prioritization of Factors from Public

Perspectives

65

4.5.3 Validation of Prioritization Factor 66

4.6 Concluding Remarks 67

5 CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary 68

5.2 Conclusions 68

5.3 Recommendations 69

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REFERENCES 71

APPENDIX 77

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LIST OF TABLES

TABLE NO. TITLE PAGE

2.1 Pipeline incidents: 2006-2016 11

2.2 Pipeline incidents: 2007-2016 11

2.3 Summary of selected onshore pipeline explosion cases

studies (2006-2016)

13

2.4 5 x 5 Risk matrix 16

2.5 Impact to reputation 17

2.6 Summary of the extracted reputation-threat factors in the

selected case study of major onshore pipeline accidents

21

2.7 Reputation loss factors from public 21

3.1 Identified reputation loss factors in recent case studies 36

3.2 Valid of return rate of questionnaire 40

3.3 Cronbach‟s alpha internal consistency 40

3.4 Average index classification 42

3.5 Principle of data transformation scheme 44

3.6 Data transformation scheme to pairwise judgment 44

3.7 Previous and current code of identified reputation loss

indicator

47

4.1 Reputation loss factors in recent case study 50

4.2 Result of questionnaires‟ Cronbach‟s alpha reliability

coefficient

51

4.3 Result of sample size and return rate of main questionnaire 51

4.4 Respondent‟s demographic 52

4.5 Respondent‟s frequency by district 52

4.6 General knowledge about oil and gas pipeline 55

4.7 Respondent‟s willingness on pipeline knowledge 58

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4.8 Average index reputation loss factor 59

4.9 Difference of the reputation loss factor ratings on

professions

60

4.10 Difference of the reputation loss factor ratings on highest

educational level

60

4.11 Difference of the reputation loss factor ratings on states 61

4.12 Priority vector and ranking of factors using AHP and SD 61

4.13 Comparison priority vector of factors using AHP and SD

with Zardasti (2016)

62

4.14 Comparison ranking factors using AHP and SD with

Zardasti (2016)

62

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LIST OF FIGURES

FIGURE NO. TITLE PAGE

2.1 Annual number of incidents 11

2.2 Pipeline incidents: 1997-2016 12

2.3 Distribution of incidents (2004-2013) 14

2.4 Many local residents burned alive, Lagos, Nigeria 22

2.5 People tried to stop the spread of an oil-fed fire, Ijegun,

Nigeria

23

2.6 Local fishermen clean up the oil, which has spread far

from the site of an oil spill

24

2.7 Petrol pipeline explosion and fire in Kenya's capital 25

2.8 Gas explosion in a residential area of Rosario, Argentina 26

2.9 Ripped open roads and overturned vehicles at section of

the city, Qingdao, China

27

2.10 People carry the body of a victim, Godavari district,

Andhra Pradesh

28

2.11 Large trench running down the center of a road, edged

with piles of concrete slabs torn apart by the force of the

blast

29

3.1 Research methodology design 34

3.2 AHP Framework in super decisions software 45

3.3 Example of calculation keyed in data in pairwise

comparison

45

3.4 Example of pairwise comparison results/prioritization of

one respondent

46

4.1 Percentage respondent‟s by states 52

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4.2 Signage 1 to 6 55

4.3 Percentage of knowledge signage at residential area 56

4.4 Respondent‟s vehicles 57

4.5 Preferable product brand 57

4.6 Knowledge about Sarawak‟s pipeline explosion in 2014 57

4.7 Pipeline safety responsibility 58

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LIST OF ABBREVIATIONS

AHP - Analytic hierarchy process

AI - Average Index

ALARP - As Low As Reasonably Practicable

CEO - Chief Executive Officer

CI - Consistency Index

CNPC - China National Petroleum Corporation

DNV - Det Norske Veritas

EGIG - European Gas pipeline Incident data Group

FAHP - Fuzzy analytic hierarchy process

GAIL - Gas Authority of India Limited

KPC - Kenya Pipeline Company

LCY - LCY Chemical Corporation

LNG - Liquefied natural gas

MCDM - Multi criteria decision making

NIL - Not in list

NNPC - Nigerian National Petroleum Corporation

NTSB - National Transportation Safety Board

PETRONAS - Petroliam Nasional Berhad

PHMSA - Pipeline Hazardous Materials Safety Administration

PGB - PETRONAS Gas Berhad

PGU - Peninsular Gas Utilisation

PTS - PETRONAS Technical Standards

RI - Random Index

RII - Relative Importance Index

RL - Reputation loss

SD - Super Decisions

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SS - Sample Size

SPSS - Statistical Packages for the Social Sciences

TSB - Transportation Safety Boards

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LIST OF SYMBOLS

Α - Cronbach‟s alpha reliability coefficient

ai - constant expressing the weight given to i,

D - degree of accuracy expressed as a proportion (0.05)

f - frequency of an observation

K - sample with more than two groups

N - number of respondents; population size; number of

rating scale index

ni - number of respondents who rate the importance

or influence of the factor as i = 1 as “very low”; 2 as

“low”; 3 as “moderate”; 4 as “high”; and 5 as

“very high”.

N - the dimension of the matrix

P - population proportion

s - the required sample size

wi - weight of factor i

X2 - the table value of chi-square

X - variable expressing the frequency response for i = 1,

2, 3, 4, and 5

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LIST OF APPENDICES

APPENDIX TITLE PAGE

A Main Questionnaire 77

B Average Index of signage at residential area 81

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CHAPTER 1

INTRODUCTION

1.1 Preface

Oil and gas transmission by long distance pipeline has become one of the

safest and most effective ways for the transportation of oil, gas and other chemicals

(Tong et al., 2016). Because these pipelines carry volatile, flammable, or toxic

materials, they have the potential to give bad impact. Many accidents, such as

explosions drew criticism from the National Transportation Safety Board and raised

congressional concern about pipeline risks. Trends in pipeline accidents suggest that

the opportunity for safety improvement shall be continued (Parfomak, 2016).

The pipeline accident events can cause public injury, property destruction,

environmental damage and reputation loss to the pipeline‟s owner. Reputation is a

major risk issue for all organizations and needs to be considered alongside all other

major risks such as operational, strategic and financial risks (Brandy and Honey,

2007). However, this reputation risk impact is always not included in the risk

assessment of pipeline damage because the risk values were not obtained in

monetary terms. The consequences of pipeline failure are also influenced by

reputational loss. Hence, it must be included and taken into account in the

consequences assessment of pipeline damage as well (Zardasti et al., 2015a).

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1.2 Background Research

Natural gas or oil is a flammable and explosive material conveyed from

pipelines transportation. It has posed special safety concerns from where various

accidents (Russo et al., 2014). Hundreds of pipeline failure happen each year because

of pollution, loss in transportation capacity, loss of gas availability and expensive

repair cost (Andersen and Misund, 1983). Nonetheless, failures on offshore pipelines

would normally take longer to be repaired and therefore interrupt business seriously

(Andersen and Misund, 1983). An accidents or incidents such as pipeline explosion

can happen if there was a gas leak in the presence of an ignition source. It may also

due to construction errors, internal and external corrosion, material defects,

operational errors, outside force damage and earthquake (Cunha, 2012; Russo et al.,

2014).

There are several examples of latest massive pipeline failure events such as

on the 28th

June, 2014, where a series of gas explosions in the southern Taiwanese

city of Kaohsiung had killed 25 people and injured 267 others. The exact cause of the

gas leaks was not clear, but reports said that the blasts were caused by ruptured

pipelines (BBC News, 2014). On 22nd

November 2013, an explosion occurred when

an oil pipeline in Chinese city of Qingdao, Shandong Province of China, leaked,

caught fire and exploded. Oil leaked from a ruptured pipeline exploded in an eastern

Chinese port city, killing at least 35 people, injuring 166 and contaminating the sea

in one of the country's worst industrial accidents of the year (Daily Mail Online,

2013). These huge pipeline failure events involved many innocent civilians on the

public area.

Safety failures in the field can cause deadly gas pipeline explosion. The

pipeline explosions can cause many negative impacts such as human losses, property

damage/ losses, economic losses, environmental damage and reputation loss to the

pipeline‟s operator (ARIA, 2009). Reputation loss can take place if there are negative

perceptions towards the stakeholders involved prior to the events. Consequence

assessment on reputation loss had always not been taken into account because it is

not visible and not in monetary value (Zardasti et al., 2015). Reputation risk is very

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important for any company (Deloitte, 2014). Good reputation takes years to establish

but it only costs seconds to destroy. A company‟s credibility and reputation are

viewed differently depending on which stakeholder holds the view (Marcellis and

Teodoresco, 2012). It is define as the frequency of the occurrence of an undesired

event in all activities that involves element of risk i.e. the possibility of failure on the

level of safety of a system was designed and operated. Such failure may pose risks to

people or the environment. The risk involved must be understood and decreased

because reducing the risk is the most effective way and develop appropriate

standards and design codes can be done by implementing precaution steps (Acton et

al., 2003).

1.3 Research Problem

A number of high-profile incidents such as explosions involving transmission

pipelines in an urban and environmentally sensitive areas have recently gained public

attention on pipeline safety (Russo et al., 2014). The incidents of large diameter high

pressure transmission pipelines can cause a significant damage to surrounding people

and properties. It may result in injuries or fatalities as well as environmental damages

(Sakuma et al., 2009). The failures with casualties have not shown any decrease over

the last decade (Papadakis, 1999). Apart from the adverse effect and loss to the

people and environment, the reputation loss is also included in the great issues being

addressed for example, the Deepwater Horizon explosion in 2010 had rose as a hot

topic where the companies are under scrutiny and reputational risk (Arena et al.,

2015).

Typically, reputation loss impacts in pipeline assessment are disregarded

because it is difficult to count, time dependent and it subjected to the criticalness of

the event (Arunraj and Maiti, 2009). Reputation loss also depends on the

stakeholder‟s expectations and historical behaviour of the entity (Bie, 2007).

Stakeholder perceptions and expectations on pipeline damage event give high impact

to the reputation loss of pipeline operators especially from the public. Public is the

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earliest impacted group by an explosion event compared to other stakeholders such

as investor, employees and customers. In the period of 1970-2013, European Gas

pipeline Incident data Group (2005) stated that the public is the most common

detector to pipeline incidents with approximately 36%, followed by 16% by patrols

and 15% by contractors (EGIG, 2015). According to Zardasti (2016), the pipeline

explosions events will decrease the public trust to the pipeline operator and

unstoppable negative media reports from public will hence be accounted for

reputation loss pipeline operator. The impact of loss of the pipeline operator‟s

reputation due to public initiated by mishandling public reports, recurrence of similar

accident, and severity of accident factors (Zardasti, 2016).

Nowadays, in a world of ubiquitous social media, managing public

expectations and perceptions to evade reputation loss of pipeline operator is very

important because perceptions can change. It can also be argued that remedial action

without disclosure is not enough to repair legitimacy, because relevant publics need

to be informed about actual changes before their perceptions can change and affect

others (Summerhays and de Villiers, 2012). The prioritization of factor impact from

public that contribute to reputation loss pipeline operator must be taken seriously.

This impact will eventually forces pipeline operator to apply mitigation measures

immediately according the factor that formerly to be dealt with (Shea, 2014; Zardasti

et al., 2015).

1.4 Research Aim and Objectives

The aim of this study is to prioritize the reputation loss factor subject to

pipeline explosion based on public perspectives. In order to achieve the research aim,

the objectives of this study are laid as follows:

i. To identify the reputation loss factor from public stakeholder perceptions in

the recent pipeline explosion cases.

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ii. To prioritize the reputation loss factor from public which are affected from

pipeline explosion events using Analytical Hierarchy Process method.

iii. To validate the prioritization of reputation loss factor with previous study.

1.5 Research Scope

This study focuses on prioritizing reputation loss factors due to pipeline

explosions from public perceptions. The public responses on the events were

observed; views from other stakeholders such as investor, customer and employee

were neglected. The data and information about latest ten years (2005-2014) the

pipeline explosion cases in this study selected by referring to the previous research.

The unidentified factors in the selected events from previous research were enriched

by the recent collected information, which gives more additional data because

reputation is time-dependent.

Questionnaire surveys carried out to obtain responses from public for this

study. In previous research, the data survey from public was gathered only from

students who pursue their higher-level studies in Malaysia. The collected data does

not have variety of categories of public‟s perceptions. In this research, the survey

data gathered from different respondents and include many categories which

differentiated by state, educational level and profession.

This study focuses on the public who lives in the regions where onshore

pipeline route of the Peninsular Gas Utilization (PGU) located in the East Coast of

Malaysia. The prioritization procedures completed by using Analytic Hierarchy

Processes (AHP) in order to reduce errors and increase accuracy.

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1.6 Significance of study

This research is focusing only on one stakeholder and the public were chosen

because they are the earliest group of the pipeline operator‟s stakeholder that affected

directly by the event. Hence, it is important to get public‟s perceptions that can

eventually lead to reputation loss of pipeline operator.

This study is one of the continuing efforts to improve results from the

previous study due to the focused sample. The research samples selection from

previous study was considered as not varies because the samples were only to

students in Malaysia. This study has gathered more samples than the previous study,

200 respondents and 72 respondents, respectively. It focused on public perceptions

and the categories of samples are of various and differentiated by state, profession

and educational level. This is one of the ways to have a better population of selected

sample of public that may directly affected by the impact of pipeline failure.

Furthermore, reviewing the recent 10-year pipeline explosion case studies (2005-

2014), improves the numbers of factors identified by previous research. Thus,

consequence of the pipeline failure is appropriately assessed.

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REFERENCES

Acton, M. R., Baldwin, T. R., and Cleaver, R. P. (2003). Development and

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