The analysis of interdependence between corrosion, physical depreciation and market value in the evaluation process of special construction assets – pipeline transportation systems

Ciprian Gheorghe

ERES from European Real Estate Society (ERES)

Abstract: In the assessment of pipeline transportation systems is very important for the assessor to analyze how market value is influenced by the size of corrosion. It is also interesting to analyse the interdependence of corrosion, physical depreciation and market value. Evaluation of special construction assets like pipelines is a complicated process that does not use traditional approaches to evaluation, but rather a mixture of evaluation methods because each pipeline is unique in its own way, but also because its value is influenced by many factors.This paper present how varies size of corrosion, physical depreciation and market value and the corrosion is influenced by several factors. The corrosion process is a complex mechanism that occurs during operation of all equipment and technological equipment in the refineries or pipelines systems or found in petrochemical installations and is done at oscillating temperature and pressure (high/low), in the presence of some work environments (type: crude oil, compressed gases, petroleum and petrochemical products, etc.). Corrosion is defined as the destruction, in a certain span of time, of metals and metal alloys as a result of chemical and/or electrochemical actions of the technological environments and surrounding or due to physical dissolutions. From the point of view of the assessor-engineer whose aim is to determine the assessment of pipeline transportation for petroleum products one is able to highlight the influence of corrosion within its depreciation.The quantitative implementation of corrosion for the estimation of market value of technological pipelines is an ongoing concern of evaluators as engineers have been determining the existence of corrosion for a long time now, yet this could not be found in a mathematical relation that was to show the interdependence between corrosion, depreciation and the market value. The relation between depreciation and corrosion by means of this factor is very useful for assessors in predicting depreciation. The emphasizing of corrosion within the estimation of market value through the influence of the factor of depreciation due to corrosion is a first step in a broader process of research which is meant to mathematically highlight the dependence of impairment due to corrosion on the characteristics of the material which the pipe is made of.

Keywords: corrosion; Market Value; physical depreciation; pipeline systems; Valuation (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2017-07-01
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