Economic Asset Optimization To Enhance Profitability Of “XSW” Oil Field Offshore Block

Abstract

Indonesian oil and gas production decreased in the last decade. Majority current oilfield producer backbone located onshore was mature field category and going to depletion phase. Meanwhile, exploration activities have not found new significant economic oil and gas reserves, then one of the efforts that can be done is to asset optimization the existing oil reserves that still have economic value. To overcome this condition, there have been shifting paradigms by the upstream company to change focus in oil and gas development field from onshore to offshore oilfield. XSW offshore block already produced oil 41.39 MMSTB and had 7.9 MMSTB remaining reserves. The project’s purpose is to create XSW development scenario to enhance its profitability with Environmental Social Governance (ESG) principle, and evaluate project economics through Production Sharing Contract (PSC) cost recovery scheme. The scenario applied sensitivity analysis of oil price, oil production cumulative, operational and capital expenditure. The best scenario can generate 7.3 MMSTB incremental oil production, total investment 81.31 million USD, gross revenue 495.52 million USD, company’s profit 57.73 million USD, government profit 86.6 million USD. As the capital budgeting perspective, the project can generate NPV 18.58 million USD, IRR 20.77%, payback period 5.42 years.

Keywords: asset optimization, economic value, offshore oilfield, Environmental Social Governance (ESG), Production Sharing Contract (PSC)