INVESTMENT ANALYSIS OF LNG STORAGE FACILITY DEVELOPMENT IN INDONESIA

• Main Author: Rachmat Utama, Bayu
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/84049
• Institution: Institut Teknologi Bandung

The gas industry has had remarkable growth in recent years, driven by increasing demand for energy sources that offer cleaner combustion compared to another fossil fuel and LNG stands at the top of the gas industry as its flexibility and transportability make it an attractive option for countries seeking to fulfill their gas demand. LNG’s growing demand for both global and domestic use drives the need for the development of LNG Infrastructure in Indonesia especially LNG storage facilities. Indonesia that has geographical advantage with its strategic location along major shipping routes provides natural advantage to become a central player in the global LNG market. LNG storage facilities enhance energy security by ensuring a reliable supply of natural gas and mitigating risks associated with fluctuating production levels and import dependency. However, investment decisions related to new LNG storage facilities are faced with uncertainties and challenges. These challenges include volatile energy markets, fluctuating LNG prices, geopolitical risks, evolving environmental regulations, and technological changes. There are some financial challenges to evaluate an LNG Storage Facility construction project such as significant upfront capital expenditure, uncertainty in input parameters, and long-term revenue projections make the needed of careful evaluation and justification to ensure long-term profitability and sustainability. This study assesses the feasibility of developing LNG storage facility in Indonesia. Commercially, it is feasible due to growing LNG demand and Indonesia's strategic advantages. The required storage fee for it to be economically viable is US$ 15.03 /m³/month. An LNG storage facility with 180,000 m³ capacity is feasible, showing an NPV of $33.706.123,46, an IRR of 10,96%, a payback period of 14,61 years, and a Profitability Index of 1,26. Increasing capacity to 200,000 m³ improves feasibility with an NPV of $44.299.887,60, an IRR of 11,61%, a payback period of 13,67 years, and a Profitability Index of 1,32. Integrating with existing infrastructure further enhances feasibility, yielding an NPV of $77.722.965,99, an IRR of 14,10%, a payback period of 11,04 years, and a Profitability Index of 1,56.