THE ECONOMIC ASSESSMENT OF CONVENTIONAL VERSUS GROSS SPLIT SCHEME FOR ANONYMOUS PRODUCTION SHARING CONTRACT

• Main Author: BOAZ (NIM 29115517), ZILVA
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/31908
• Institution: Institut Teknologi Bandung

This final assignment is to perform the economic assessment between conventional versus gross split scheme as mandated thru Regulation 52/2017 for Production Sharing Contract (“PSC”) who is already at the production stage; in this case Anonymous PSC. The final assignment objective is to give recommendations for Anonymous PSC to decide what scheme will result the best outcome for Contractor. <br /> <br /> <br /> The research will perform the financial simulation, SWOT analysis and 5 Forces of Porter. The simulation uses components of cost recovery under the conventional scheme as well as variable and progressive components under gross split as comparison to give pros and cons so that Anonymous PSC could consider whether it is economics to extend the business in Indonesia or not. NPV and IRR calculations are also performed with assumptions should Contractors Cooperation Contract still implements the conventional scheme or changes to gross split scheme until 2028. <br /> <br /> <br /> Business valuation with WACC 8.39% has resulted that by using the conventional scheme, the IRR would be 19.1% (oil) dan 22.3% (gas), while the NPV would be USD 24.5 million (oil) and USD 297.5 million (gas). Gross split scheme generates IRR in total of 17.8% (oil) dan 11.9% (gas), while the NPV would be USD 12.2 million (oil) and USD 80.5 million (gas). The simulations performed under Anonymous PSC by using the similar parameters to both schemes, with some adjustments based on the variable and progressive components under gross split scheme – have concluded that both schemes are applicable, feasible and profitable to Anonymous PSC. However, conventional scheme would be more beneficial for Government and Contractor; especially Wise as the operator of Anonymous PSC. This is due to the cost deduction is performed after the sharing profit. <br /> <br /> <br /> The research done has resulted the recommendation that Anonymous PSC to continue using conventional scheme until the contract ends in year 2028. Contractor shall consider to extend the contract or not by performing the economics as well as revisiting the term and condition of the new contract.