PROJECT FINANCING STRATEGY IN THE OIL AND GAS DOWNSTREAM INDUSTRY(CASE STUDY: THE INTEGRATED OIL REFINERY AND PETROCHEMICAL PLANT PROJECT AT PT MAJU JAYA)

• Main Author: Mandalika, Nodya
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/85932
• Institution: Institut Teknologi Bandung

Global oil refinery industry has encountered several challenges, such as crude oil price volatility, increase awareness for environmental friendly operation, and trend of renewable energies. Global oil demand is forecasted to grow but at slower rate between 2025 and 2035. However, in Indonesia, the trend of oil consumption is still steadily increasing, reaching up to 1580 million bpd in 2022. With the total nationwide oil refining capacity is 1 million bpd only, Indonesia still heavily rely on import of the oil refinery products to fulfil domestic demand. Petrochemical industry is a sector of industry that process hydrocarbon feedstocks into variety of chemical products. This industry is a critical for the downstream plastic industry. Global Petrochemical industry is forecasted to grow at 5%-6% rate between 2022 and 2031 due to rising demand in plastic packaging application and automotive industry. Indonesian petrochemical market is also forecasted to grow at 5%-6% between 2022 to 2035. However, domestic production capacity is still lower than capacity required by demand. Indonesian petrochemical manufacturers are still quite few and domestic market still rely on imported products to fulfil the demand. PT MAJU JAYA is a joint venture company between one of Indonesia State Own Enterprise (SOE) and an European oil and gas companies, is going to capture the business opportunity from the two industries. PT MAJU JAYA plans to build the first integrated oil refinery and petrochemical complex in Indonesia. Integration of the oil refinery and petrochemical production facilities at one place will provide economic benefits by sharing and exchanging various streams such as feedstocks, by products and utilities. It can save the energy cost by optimizing the electric power, steam, process water and cooling system. However, PT MAJU JAYA will require significant capital investments, ranging from 10 to 20 billion USD, based on benchmark of similar projects ever built globally. PT MAJU JAYA needs to conduct feasibility analysis for the business opportunity and evaluating the potential source of funds before committing into the capital investment. ii This research is analyzing the economic feasibility of the integrated oil refinery and petrochemical complex project. The feasibility analysis performed at discount rate 8%, 10% and 12% shows that the project is feasible. Furthermore, this research is evaluating the potential source of funds to finance the project, such as shareholder’s equity, bank loans and corporate bonds. The result of the analysis recommends PT MAJU JAYA to choose mix financing between international bank loans and shareholder’s equity at 60:40 ratio.