THE EVALUATION OF CO 2 REMOVAL CONTRACT (A CASE STDY OF RANDEGAN AREA)

• Main Author: Wahyu Alimsyah, Tomi
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/63840
• Institution: Institut Teknologi Bandung

In 2020, Pertamina Group was faced with a triple shock challenge. This condition requires Pertamina Group to implement an opex efficiency strategy of 30%. Meanwhile, PT Pertamina EP Jatibarang Field has a contract for renting a CO2 removal plant in the Randegan area, which ends in November 2021. So now is the right time to evaluate the contract to provide added value for the company. This final project evaluates the ongoing use of a CO2 removal plant by using quantitative methods to calculate project valuation based on cash flow. The financial assessment results will help management, as the decision-maker, determine whether the project can provide value to the company whether the CO2 removal plant contract needs to be extended or completed. The analysis of the oil and gas business situation in this final project uses (i) external analysis using PESTEL analysis to analyse a series of external forces (Political, Economic, Social-cultural, Technological, Ecological/Environmental, and Legal); (ii) external analysis using Porters' 5 Forces model to see the company's competitive position in the market and help the company determine strategy; and (iii) internal analysis using the VRIO framework. Oil and gas business, like business in general, requires economic indicators to determine the feasibility of a project. In this final project, economic indicators use financial valuation calculations through the Discounted Cash Flow (DCF) method to compare scenarios with versus without CO2 Removal (Scenario 1 vs. Scenario 2), sensitivity analysis, and Monte Carlo simulations for selected scenarios. For DCF analysis, using a 10% discount rate, it produces a Present Value (PV) of US$ 5,401,792 for Scenario 1 and an PV of US$ 6,212,781 for Scenario 2. So, it can be concluded that the project in question gives better results when using scenario 2 Sensitivity analysis was conducted to see how the PV varies with parameter changes. The parameters tested in the sensitivity analysis are Oil Production, Gas Production, Oil Price, Gas Price, and Opex with the assumption of a change of ±20% from the initial condition (base). From the sensitivity analysis, it can be concluded that the sensitivity to changes in oil prices and oil production is the variable that has the most significant influence. A 20% change will affect the Contractor's PV by 17%, with a maximum value of US$7,242,910. Monte Carlo simulation is carried out to make it easier for decision-makers to determine the most optimal choice by presenting more than one scenario to produce several PV values by modelling sensitive variables using probability distributions. Based on the Monte Carlo simulation using 1000 iterations, the PV>Base is 52.31%, while the PV<Base is 47.69%, and the total PV<0 is only 4.67% which is still below the maximum value (<10%). Therefore, it can be concluded that Scenario 2 is declared feasible.