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Evaluation of Offshore Project Development under Two Fiscal Regime in Indonesia

Author

Listed:
  • Dwi Atty Mardiana

    (Universitas Trisakti, Indonesia,)

  • Alfrets Lumi

    (SKK Migas, Indonesia.)

  • Edward Erwanto

    (SKK Migas, Indonesia.)

  • Selvi Selvi

    (SKK Migas, Indonesia.)

  • Alfandra Ihsan

    (SKK Migas, Indonesia.)

  • Raden Adya Fadillah

    (SKK Migas, Indonesia.)

Abstract

The general characteristics of deep water offshore field development are the uncertainty of geological conditions, high technology requirements and development costs, and volatility of oil and gas prices. Despite these challenges, the development of a deep water offshore field remains a strategic project for sustainable economic growth. This study will evaluate the impact of current fiscal of the three offshore field development and estimates the limits of oil and gas price, reserves, and expenses. The intention is to obtain the optimal conditions to encourage the development of new offshore fields. The approached will used a discounted cash flow modelling, followed by evaluate the profitability risk using deterministic and stochastic sensitivity analysis. Monte Carlo simulation used to take into account the uncertainty of several variables, such as oil and gas prices, operating costs, development costs, and reserves. The result shows that investment decisions for the development of new and/or extensions fields in offshore areas remain quite challenging economically, considering to the high development and operating costs, as well as fluctuating of oil and gas prices. The opportunity to obtain a positive net present value on new deep water offshore development fields is less than 41%, thus indicates that further initiative of cost efficiency and fiscal incentive is required in preparing investment planning of new deep water offshore field to compensate the high development and operational cost.

Suggested Citation

  • Dwi Atty Mardiana & Alfrets Lumi & Edward Erwanto & Selvi Selvi & Alfandra Ihsan & Raden Adya Fadillah, 2023. "Evaluation of Offshore Project Development under Two Fiscal Regime in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 28-35, November.
  • Handle: RePEc:eco:journ2:2023-06-4
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    References listed on IDEAS

    as
    1. Abdul-Salam, Yakubu & Kemp, Alex & Phimister, Euan, 2021. "Unlocking the economic viability of marginal UKCS discoveries: Optimising cluster developments," Energy Economics, Elsevier, vol. 97(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monte Carlo Simulation; offshore development; petroleum economic; production sharing contract; stochastic sensitivity;
    All these keywords.

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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