Scenario Analysis Of A Gas Field Development Project In South Sumatra, Indonesia - Reserves Volume And Gas Price Scenarios

Abstract

As the largest oil and gas producing country in ASEAN, Indonesia has been facing challenges in maintaining its production level. Existing mature fields, lack of new discoveries, changes in the government policies and investors’ limited appetite in exploring new resources due to economic reasons have contributed to the decline of national production. The recent gas discovery in Palembang PSC in South Sumatra region has brought new optimism in the country’s energy industry. The main objective of this study is to explore how PSC contractor evaluate and perform decision making under several uncertainties within the project and what types of government incentives are required for scenarios that are deemed uneconomic to be executed. The research focuses on project economics for the contractor under the recently implemented domestic gas price cap policy to industrial and electricity sectors using scenario analysis on gas resource volumes, development, capital and operational expenses, and gas market allocations. The study concluded that government incentives are critically important to ensure that the project development is economically feasible to be progressed in order to provide positive returns to both PSC contractor and Indonesian government.

Keyword:Decision Making Under Uncertainty, Economic Evaluation, Gas Commercialization, Gas Field Development, Scenario Analysis