An Economic Analysis of Indonesias Current Petroleum Production Sharing

Contract: Special Mention of Offshore Frontier Oil Field

Satrio Raharjo Dipokusumo

Introduction Indonesias PSC - Deep Water Oil Fiscal terms Base-case Results
Profitability Large Field Medium Field Small Field
Indicators (Field A) (Field B) (Field C)
More oil and gas reserves are found in Pre-tax NPV 3,032 1,114 455
Indonesias deep water frontier area. ($million)
An optimal fiscal regime is essential to capture Pre-tax IRR 24.3% 23.9% 22.7%
the economic rent while avoiding investment
disincentives. Post-tax NPV 571 153 5.4
This study evaluates Indonesias current PSC ($million)
Post-tax IRR 14.1% 12.8% 10.2%
regime under deep water PSC fiscal terms,
considering its flexibility and neutrality as a rent Government 68.6% 68.7% 69.6%
capture mechanism. Take
Flow of Methodology Share of Economic Rents
Data and Methodology Government Take (%)
INPUT PROFITABILITY
Representative offshore deep water oil fields DCF MODEL 69.6% 68.6%
PARAMETERS METRICS Large field
are incorporated: large (250 mmbls), medium Pre-tax Condition
Pre-tax NPV Medium Field
(100 mmbbls) and small fields (50 mmbbls). Oil Price (before fiscal terms
Pre-tax IRR
applied Small field
Discounted Cash Flow method is used in the Annual Oil
Post-tax Condition Post-tax NPV
Production (after fiscal terms Post-tax IRR
base-case scenario: NPV and IRR are the applied) Government 68.7%
Take
main yardstick.

Sensitivity analysis and tornado charts

Monte Carlo simulation is used to measure Results Conclusion
risk and uncertainty. Government take in all model fields are larger
Key Data: than 65%, due to the DMO policy. Flexibility and neutrality are not yet present in
Government take is higher in less profitable oil Indonesias PSC deep water oil fiscal term.
Field Size Field A Field B Field C
fields. Government fails to optimally collect the
(250mbbls) (100mbbls) (50mbbls)
Devex 15 17.5 20
Two most sensitive variables that affect project economic rent from oil field exploration and
($/barrel) profitability: oil price and development cost. development activities.
Opex 15 17.5 20 Monte Carlo simulation: field C gives highest The current fiscal term discourage investments
($/barrel) risk and uncertainty to the investor. in marginal fields.
Satrio Raharjo Dipokusumo s.dipokusumo.14@aberdeen.ac.uk +44 (0) 7752195107 www.abdn.ac.uk
University of Aberdeen, King's College, Aberdeen, AB24 3FX