FINANCIAL FEASIBILITY STUDY OF LNG DISTRIBUTION AND REGASIFICATION PROJECT TO PLN JERANJANG

• Main Author: Yoga Saryanto, Widhi
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/63304
• Institution: Institut Teknologi Bandung

Indonesia consists of many islands scattered and separated by oceans. As a result, integrated infrastructure development, including that of the electricity grid, becomes expensive, so that many islands do not have clean, affordable, and reliable energy. In The Indonesian Archipelago, electricity is primarily generated from coal, diesel, or gas power plants. Coal is still the most widely used fuel to generate electricity, but it contributes significantly to high levels of air pollution. Meanwhile, diesel is a relatively expensive fuel, causing high electricity generation cost, thus rendering the old generators expensive to operate. The Indonesian government has a target described in Peraturan Presiden No. 22/2017 “Rencana Umum Energi Nasional” to increase natural gas and renewables’ share in t he energy mix to 55% by 2050. To support the target, the Indonesia government is programming the implementation of a fuel conversion from diesel to LNG that has cleaner energy and less emission than diesel in several Power Generation.Efforts to increase LNG usage as a fuel are expected to reduce fuel imports, reduce government subsidies and also reduce air pollution. PT Badak Natural Gas Liquefaction, widely known as Badak LNG, is a world-class LNG company operating the Bontang LNG plant in East Kalimantan for more than 40 years. Based on feedgas forecast data, feed gas that will be processed in the Badak LNG Plant will experience a decline. This condition will reduce the number of running train operations and also make the company unsustainable. When it comes to sustainability, including that of a company, a wellthought strategy is what can make a difference. And the decrease in feed gas entering the Badak LNG Plant only gives it even more reason to devise a strategy to sustain itself. One strategy is to diversify the business into several business units. One of these projects is LNG Distribution & Regasification for Power Plant. It is a potential project for Badak LNG future business because it is also a project that supports governmental programs as well as the government's assignment for Pertamina and its affiliates in KEPMEN ESDM No.13, 2020 As a new project or new business, Badak LNG needs to perform feasibility study of the project including financial feasibility and other parameters. To analyze the business environment, external factor analysis is conducted by using PESTLE to identify the project feasibility based on political, economic, social, technology, legal and environment. The investment project analysis is conducted to determine the regasification fee and limitation LNG demand (volume) to make the project run. The investment and operational cost will be identified by using primary data and secondary data. From the LNG demand / volume regasified, the revenue will be generated by regasification fee payment. For project feasibility criteria, capital budgeting technique is applied such as NPV, IRR, payback period, and profitability index. Based on the analysis after conducting financial projection for LNG Distribution and Regasification Project, this project is feasible with an IRR of 15.68%, NPV of USD 34.442.283,01, profitability index of 1.51, and a payback period of 6.55 years, with LNG demand of 10 mmscfd, regasification fee of 3.86 USD/MMBtu, funding scenario of 80% debt and 20% equity, and Build-Operate-Own (BOO) contract business scheme during the project lifetime of 20 years. The components that affect the project the most, based on the analysis, are regasification fee, OPEX, and LNG demand. To mitigate the decrease in LNG demand (regasification volume), take or pay strategy shall be implemented and negotiated with PLN. The good maintenance strategy needs to be implemented to press the OPEX. In the other hand, to mitigate the fluctuation of LNG regasification fee, contract agreement for the project duration and fixed price implementation shall be applied. As for the negotiation with customer, the minimum regasification fee is 2.626 USD/MMBtu with an LNG demand of 10 mmscfd. Meanwhile, the minimum LNG demand to make this project feasible is 6.81 mmscfd, with a regasification fee of 3.86 USD/MMBtu as the basis. As such, if the LNG demand is less than 6.81 mmscfd, the project is not feasible.