Coal Gasification Project Feasibility Study Using Viability Gap Fund (VGF) & Tax Holiday (Case Study: PT Pupuk Indonesia)

• Main Author: Rizki Hamdani - 29115098, Fajar
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/27118
• Institution: Institut Teknologi Bandung

PTPI is one of the Indonesia’s SOEs (Stated-Owned Enterprises), formerly known as PT Pupuk <br /> <br /> Sriwidjaja (Persero) or PUSRI (Persero), is the first nitrogen fertilizer (urea) producer in Indonesia. <br /> <br /> PTPI is the largest nitrogen fertilizer producer, which is urea, in Southeast Asia. The total installed <br /> <br /> capacity approximately 9 million tonne/year for 12 plants producing urea, PTPI sells urea both <br /> <br /> domestically and exported. PTPI has a duty to supply 7 million tonne / year urea domestically as urea <br /> <br /> public service obligation (PSO) program from government. In producing urea, natural gas as raw <br /> <br /> material contributes up to ±70% of total production cost. It is a challenge for PTPI to compete in the <br /> <br /> world market with the lowest natural gas price in competitor countries up to US$ 1 / MMBTU. However, <br /> <br /> in the absence of long-term gas supply guarantees, which will resulted in no new urea plant being built, <br /> <br /> PTPI’s total urea production capacity will decline until it will not produce urea again in 2031. PTPI <br /> <br /> initiative to build coal gasification to urea plant as alternative to build plant without depending natural <br /> <br /> gas as raw material. <br /> <br /> Indonesia is one of the largest coal exporters in the world in exporting medium quality thermal coal <br /> <br /> types (between 5,100 and 6,100 kcal/kg) and low quality (under 5,100 kcal/kg), especially to China and <br /> <br /> India. Indonesia’s coal reserves, if current production is increased, will be exhausted within <br /> <br /> approximately ±80 years is stated by Minisry of Energy and Mineral Resources (Kementrian ESDM). <br /> <br /> This is better than the natural gas that is expected to run out within ±48 years. In the last ten year, world <br /> <br /> coal price is cheaper than Indonesia natural gas price. The average of coal price with 6,667 kcal/kg is <br /> <br /> 3.45 dollar per MMBtu compare to Indonesia natural gas price that reached 11.67 dollar per MMBtu. <br /> <br /> The highest price of coal 5.08 dollar per MMBtu compare to Indonesia natural gas price that reached <br /> <br /> 16.55 dollar per MMBtu. The lower the calories contained in coal, the price will be cheaper. This project <br /> <br /> is using low rank coal, which means the coal price is cheaper <br /> <br /> In developing the urea plant, whether the raw material sources from natural gas or coal, requires more <br /> <br /> than half billion dollars. However, if compared to the EPC Cost of both investment, urea with natural <br /> <br /> gas as raw material plant is cheaper than urea with coal as raw material plant (with same capacity). With <br /> <br /> considerable of this investment cost, it makes challenge to develop Coal Gasification to Urea Plant. <br /> <br /> The high cost of investment in developing Coal Gasification to Urea Plant required some business <br /> <br /> scheme alternatives, so the plant can be operated. There are several investment incentives offered by <br /> <br /> Indonesia’s Government to investors, such as Tax Holiday and Viability Gap Fund (VGF), which is one <br /> <br /> form of Indonesia’s Public Private Partnership (PPP) program. <br /> <br /> The literature review about the regulation of the incentive, discussion and interview with EPC <br /> <br /> Contractor and also the government is used to develop this research. The financial model is modelled <br /> <br /> by assumption from the EPC Contractor such as EPC Cost estimation, operating cost and other. Only <br /> <br /> one incentive can be used as coal gasification to urea plant business scheme. Thus in this feasibility <br /> <br /> study model for this project,will be done with 3 alternative scheme which are Case 1: the project without <br /> <br /> investment incentives, Case 2: the project using Tax Holiday, and the last for Case 3: the project using <br /> <br /> Viability Gap Fund (VGF). <br /> <br /> After the financial model, all of the feasibility parameter such as IRR, NPV and PBP will be compared <br /> <br /> between alternatives. Monte Carlo Simulation and Sensitivity Analysis will be conducted for the <br /> <br /> alternatives with the best result of feasibility parameter. This analysis will show the probability of this <br /> <br /> project will success and what variable can affect the “successability” of this project. This research will <br /> <br /> help PTPI choose the best scheme and anticipate the risk that will come with this project.