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In oil pipeline leak detection and location, noise in the pressure signal collected at the end of the pipeline affects the accuracy of leak detection and the error of leakage location. To reduce the noise interference, an improved local mean decomposition signal analysis method is proposed. The production functions (PFs) that are related to the leak signal can be exacted, and it is necessary to know the characteristics of leak signals or noise in advance. According to the cross-correlation function, there is a significant peak between the measured signals, which are decomposed into a number of PFs. These reconstructed principal PF components are obtained, and a wavelet analysis is used to remove the noise in the reconstructed signal. On this basis, the signal features are extracted according to the time-domain feature and the waveform feature, which are input into the least squares twin support vector machine (LSTSVM), to recognize pipeline leaks. According to the reconstructed signal after wavelet denoising, the time-delay estimate of the negative pressure signal at the end of the pipeline is obtained by the cross-correlation function, and the leak location is ultimately calculated by combining the time delay with the leak signal propagation velocity. A flow model for pipeline leakage is proposed based on the Flowmaster software, where the collected data of the different working conditions are processed. The experimental results show that the proposed method can effectively identify different working conditions and accurately locate the leakage point.