Analysis of Incentives Implementation in Jambaran Tiung Biru Development Project PT Pertamina EP Cepu

Indonesia’s regulatory incentives in the oil and gas sector are designed to attract investment and enhance production. These incentives include tax holidays, DMO (Domestic Market Obligation) holidays, investment credits, accelerated depreciation, PSC (Production Sharing Contract) extensions, and renegotiations of the contractor-government revenue split. This study investigates how these incentives might address the economic challenges faced by PT PEPC JTB in the Jambaran. Tiung Biru Unitization Project, which is currently experiencing negative Net Present Value (NPV) and Payback Period (PBP) extends until the project’s terminal stage. The research explores which incentives, in what proportions, and through which implementation strategies, can improve the project’s financial performance. The analysis is structured around four control scenarios—Scenario 1, Scenario 2, Scenario 3, and Scenario 4—that will be tested and compared to determine the most effective approach. To simulate the scenarios, a financial model based on PT PEPC JTB’s proprietary model, which operates within the framework of the Production Sharing Contract (PSC) and PSC accounting guidelines, was modified for this study. Key assumptions were incorporated into the model, including the timing and the amount of investment realization, the starting date for depreciation, operational expenditures, and long-term projections for gas and condensate production and pricing. These assumptions, aligned with the PSC framework, allowed for a comprehensive evaluation of each control scenario based on economic parameters such as NPV, IRR, Profitability Index (PI), and Payback Period (PBP). Among the four scenarios, Scenario 1—incorporating a tax holiday, a PSC extension beyond 2035, an increased investment credit, and accelerated depreciation—proved to be the most effective. Under the base case conditions, which serve as the reference scenario, Scenario 1 resulted in the highest NPV (with a 10% discount rate), an IRR of 12.92% bigger than WACC rate, a PI of 1.15, and a PBP of 17 years, making it the most attractive option for improving the project’s economics.