This case requires candidates to build a value creation framework by quantifying three main components: (1) transportation cost savings from increased pipeline capacity and switching from expensive alternatives, (2) savings from extended pipeline lifetime, and (3) implementation costs. The analysis should then validate the pricing by comparing it to the university's R&D investment and NOC's alternative investment option of expanding pipeline capacity. The case tests financial modeling, valuation methodology, and business reasoning under uncertainty.
Minerva’s University Fluids Research Lab has discovered a more efficient way to transport crude petroleum oil inside pipelines. This new technology can be used in midstream applications where the oil is acquired from the extraction plant and delivered to the refinery plant. The university invested $ 1,200M in this project during the last 12 years.
The new technology mixes water and oil under certain conditions to reduce the loss of energy, caused by the friction between the oil and the pipeline surface while being transported. As a result, the transport between two given points gets 15% faster and the useful lifetime of the pipelines increases by 20%.
Minerva’s University asked our help to value for how much they should sell the technology.