The PSC Cost Recovery Analysis- the Comparison Between Several Scenarios of an Oil Producing Field in Indonesia
Mustamina Maulani, Andry Prima, Asri Nugrahanti, Cahaya Rosyidan, Lisa Samura, Bayu Satiyawira, Widia Yanti

Universitas Trisakti

Abstract

The Production Sharing Contract (PSC) is a pivotal mechanism governing profit-sharing in oil and gas extraction, outlining the distribution of profits between the government and contractor companies. This sharing is contingent on deducting cost recovery, a crucial element in collaboration agreements within the upstream oil and gas sector. Efficient cost recovery management is essential for both the state and contractors. Assessing the efficacy of this contractual framework, a comprehensive analysis explores three field development scenarios within the XYZ field. The first scenario involves 5 infill wells and 3 workovers. The second scenario expands on the first scenario with an additional 3 infill wells, and the third scenario further advances with 2 extra infill wells and 2 workovers. Upon evaluating the implications, the third scenario proves to be the most lucrative, boasting the highest Net Present Value (NPV) for the contractor at 5,442 million USD compared to other scenarios. The cumulative forecast predicts oil production of 2,185 thousand barrels from 2021 to 2035, generating a gross revenue of 131.1044 million USD. Notably, the Internal Rate of Return (IRR) is commendable at 26.21%, exceeding the Minimum Acceptable Rate of Return (MARR) set at 15%, with a Payback Period of 4.30 years. Moreover, the sensitivity analysis of the responsiveness of economic parameters and their impact on NPV and IRR values within the project. Keywords such as IRR, NPV, PSC Cost Recovery, and Sensitivity Analysis encapsulate the essence of this study, offering a holistic understanding of the dynamics in oil and gas mining ventures.

Keywords: IRR, NPV, PSC Cost Recovery, and Sensitivity Analysis

Topic: Engineering