LUCRATIVE INVESTMENT DECISION STRATEGY ON RMK PSC - AN ECONOMIC EVALUATION
RMK PSC is part of upstream sub-holding of a national oil and gas company. It has been operating since 2016 by taking over field management from Medco E&P and has an Oil and Gas Cooperation contract with government under Production Sharing Contract (PSC) scheme for 20 years. During 6 years of pr...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/74843 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | RMK PSC is part of upstream sub-holding of a national oil and gas company. It has been operating since 2016 by taking over field management from Medco E&P and has an Oil and Gas Cooperation contract with government under Production Sharing Contract (PSC) scheme for 20 years. During 6 years of production, RMK PSC only once obtained positive cash flow, the rest of the time it suffered losses. This condition requires RMK PSC to review its field development strategy to achieve maximum profit during contract period. If it fails, upstream subholding has option to divest RMK PSC to another party.
The development study was conducted with a qualitative approach by studying company's internal and external environmental conditions to increase future potential and mitigate future risks and threats to achieve sustainable competitive advantages. In addition to qualitative approach, a quantitative approach was also conducted by performing an financial analysis of all field development scenarios. Net Present Value (NPV), and Internal Rate of Return (IRR) were economic parameters considered. Sensitivity analysis was conducted by assuming changes in oil prices, operating costs, total production, and investment costs by 40% of baseline values.
Results of the evaluation will decide the best scenario to be taken for further operation. Recommendations on evaluation results are made if the best option is to continue operations. Divestment is the best option if all field development scenarios do not present a positive cash flow. By divesting RMK PSC, the upstream sub-holding will obtain fresh funds that can be used to invest in projects that provide maximum profit.
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