INVESTMENT ANALYSIS FOR LARGEST HEAVY OIL FIELD IN INDONESIA UNDER INDONESIA’S GROSS-SPLIT PRODUCTION SHARING CONTRACT

• Main Author: Nail Ritinov, Muhammad
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/39164
• Institution: Institut Teknologi Bandung

XYZ field is largest heavy oil field in Indonesia, located in ABC Block Production Sharing Contract (PSC). Based on recent announcement from Government of Indonesia (GOI) in July 2018, this block will be handed over to National Oil Company (NOC) in August 2021 after more than 90 years being managed by International Oil Company (IOC). NOC will manage ABC Block under new form of PSC, the Gross-Split PSC that just established in 2017, changing from current model of Cost Recovery PSC that has been implemented in ABC Block for more than 20 years. This research aim to assess the investment analysis of XYZ field in order to find the best investment alternative that will give highest financial return for NOC. The investment decision will consider strategic approach and economic approach. Strategic approach including external and internal analysis of ABC block will carried out to understand the business issue situation. In this research the author will use Capital Budgeting Method with Discounted Cash Flow to analyze the investment feasibility. Result from strategic approach show that ABC Block, especially XYZ field has a competitive advantage therefore NOC should maximize its investment in ABC Block. For investment evaluation, there are three alternatives of investment that author proposed in this research: (1) Current Area Development Program, (2) New Area Development Program, and (3) Combination of Current Area and New Area Development Program. The result of economic evaluation are; Alternative-1: NPV USD 504.7MM and IRR 10.4%, Alternative-2: NPV USD 795.8MM and IRR 15.0%, and Altenative-3: NPV USD 1,386.0MM and IRR 31.0%. The risk analysis using Coefficient of Variance (CV) show CV values of 0.91, 0.62, and 0.43 for Alternative-1 to Alternative-3 respectively. Thus, it can be concluded that Alternative-3 is best alternative due to highest NPV value and lowest CV value. This research will help NOC to be more efficient in evaluate the investment in ABC Block, especially on XYZ field.