EVALUATION OF THE REQUIRED ECONOMIC INCENTIVE IN SUSTAINING E&E ACTIVITIES IN MACAROON BLOCK PSC

• Main Author: Borselano, Betrus
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/65359
• Institution: Institut Teknologi Bandung

After 50 years of being managed by Total E&P, the Government of Indonesia finally awarded the Macaroon Block located in East Kalimantan Province to PT Macaroon in 2018. In order to suppress the natural decline in production, the Macaroon Block requires substantial amount of additional opex and capex. Apart from that, PT Macaroon also received a PSC scheme which was less desirable to than what was obtained by the previous contractor. With the volatility of world oil prices, it is necessary to evaluate the long-term sustainability of exploration and exploitation activities in the Macaroon PSC. To evaluate business conditions, the SWOT and PESTLE frameworks are used to determine the influence of internal and external factors on the business environment. To measure the attractiveness of the upstream oil and gas industry, the Porter's Five Forces framework is used. The economic evaluation process uses the capital budgeting method with discounted cash flow. Based on economic indicators using a discount factor of 11.33%, the NPV for Contractors is -92 MUSD, while the NPV for the Government is 934 MUSD. The IRR value using the formula available in the excel program returns the value of 3%, below the Company required rate. Based on this evaluation, it can be concluded that the existing contract terms will not provide additional economic value for PT Macaroon for the remaining contract. This indicates the need to evaluate what government incentives are needed to improve the economy of the Macaroon Block.