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Investment Analysis for Largest Heavy Oil Field in Indonesia under Indonesia’s Gross Split Production Sharing Contract

Muhammad Ritinov, Ahmad Danu Prasetyo


Abstract. As largest heavy oil field in Indonesia, XYZ field is important portfolio to National Oil Company (NOC) as they will operate the field (as part of ABC Block) starting August 202. NOC will manage ABC Block under new form of PSC, the Gross-Split PSC that just established in 2017, changing from current model of Cost Recovery PSC that has been implemented in ABC Block for more than 20 years. This research aims to assess the investment analysis of XYZ field. Result from strategic approach show that ABC Block, especially XYZ field has a competitive advantage therefore NOC should maximize its investment in ABC Block. For investment evaluation, there are three alternatives of investment that author proposed in this research: (1) Current Area Development Program, (2) New Area Development Program, and (3) Combination. The results of economic evaluation are; Alternative-1: NPV USD 504.7MM and IRR 10.4%, Alternative-2: NPV USD 795.8MM and IRR 15.0%, and Altenative-3: NPV USD 1,386.0MM and IRR 31.0%. The risk analysis using Coefficient of Variance (CV) show CV values of 0.91, 0.62, and 0.43 for Alternative-1 to Alternative-3 respectively. Thus, it can be concluded that Alternative-3 is best alternative due to highest NPV value and lowest CV value.

Keywords: Investment; Heavy Oil; Gross Split; Production Sharing Contract


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