Project Investment Analysis: Case Study of Installation Additional Offloading Pump at B-Field to Recover Oil Production



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Submitted Jul 22, 2022
Published Aug 18, 2022
10.24018/ejbmr.2022.7.4.1591

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Oil and gas production in Indonesia keeps declining while consumption increases, resulting in Indonesia being a net oil importer since 2004. The problem that is faced by many producers right now is the mature field with an aging production facility with frequent unplanned shutdowns that could jeopardize production. If not responded to promptly and adequately, the field could lose its production. This is one of the challenges that PT ABC are facing. This study will present an investment project analysis to procure additional permanent offloading pumps at Field-B PT ABC to help revitalize the field after an unplanned shutdown. The additional offloading pump is intended to speed up wells' potential recovery and minimize potential loss after shutting down. Two scenarios are evaluated for the additional offloading pump: buy case or lease case. The investment study is performed by exercising the business situation analysis and then using discounted cash flow (DCF) method for the financial feasibility. From the business situation analysis of PESTEL for external and VRIO method for internal analysis, both analyses suggest the external and internal aspects support the investment project of having the additional offloading pump. The DCF analysis is performed using the Production Sharing Contract (PSC) scheme applied to PT ABC. For the buy case, the Net Present Value (NPV) is 0.89 million $ with Monte Carlo Simulation showing the possibility of having a negative NPV is 7%. For the lease case, the NPV is 2.32 million $ with Monte Carlo Simulation showing the possibility of a negative NPV of 0%. Based on the DCF parameter analysis then, it is suggested to the management of PT ABC to invest in additional offloading pumps at Field-B by using the lease option, which shows better NPV.

Keywords: Discounted Cash Flow Analysis, Monte Carlo Simulation, Project Financial Valuation, Sensitivity Analysis

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