COMPARATIVE ANALYSIS OF FINANCIAL REWARD ON GROSS SPLIT VERSUS CONVENTIONAL PSC FOR X FIELD OF Y BLOCK

• Main Author: Firwandi, Deni
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/47615
• Institution: Institut Teknologi Bandung

The contractor signed the PSC cost recovery in 2012. In the cost recovery scheme, the profit-sharing was carried out after gross revenue was reduced by First Tranche Petroleum (FTP) and petroleum operating costs. Petroleum operating costs consist of G&G surveys and studies, exploration & development drilling, production facilities, production operations, and general administration. The ratio of profit sharing before aggregate tax is 41.6667% for BPMIGAS versus 58.3333% for Contractors (oil) and 33.3333% for BPMIGAS versus 66.3337% for Contractors (gas). Hydrocarbons were discovered in the second year of the contract and after the appraisal well was decided that the X field was feasible to be developed with an investment of US$1.28 billion to get gas recoverable reserves 814.1 BSCF. In 2017 the government issued EMR Regulation No. 8 of 2017. The contractor was offered to use the gross split scheme. The base split for contractors before aggregate tax is 43% (oil) and 48% (gas) including petroleum cost. It will be added by a variable split and progressive split. In October 2019 the Minister of Energy and Mineral Resources was replaced by a new one and he offered contractors to use either PSC cost recovery or gross split PSC. The business issue in this thesis is to clarify which type of contracts to provide a better financial bottom line between the current PSC term or new gross split. The indicator parameters to evaluate are net present value (NPV), internal rate of return (IRR), and payout time (POT) for both PSC cost recovery scheme and PSC gross split scheme. Political and legal aspects will influence the decision making of the X field development. Changes to the above regulations produce threats as well as opportunities for Contractor to choose the most profitable fiscal scheme. In this research, it is assumed that the government does not change the regulation after the Contractor decides on the fiscal scheme chosen. The economic aspect of gas prices is also a threat because it follows the decline in oil prices, in this study gas price is assumed to remain US$6/MMBTU. In the technological aspect, local content optimization is done up to 30%. Social and environmental aspects do not affect the research calculations because it is assumed that petroleum operations run smoothly and can empower local residents as a source of labor in developing of the X field. Simulation of financial outcome using two conventional fiscal systems and a gross split was conducted. Expenditures, production profiles, and gas prices are assumed the same. The results show that the NPV@10% of the gross split system is US$1.04 billion or higher than the conventional system US$792 million. IRR of the gross split system is 50.67% higher than the conventional system 47.68%, and the POT of gross split system is 3.67 years faster than the conventional system 3.90 years. The conclusion is gross split fiscal scheme is the most favorable for contractors compare to the conventional fiscal scheme in developing the X field of Y block.