Designing the Maximum Allowable Cost of Surface Facilities Using the Control Chart Analysis: A Case Study in Indonesia

Abstract

ABSTRACT During the period from 2005 to 2018, the oil prices had reached the highest level in 2008 (99.67 US$/bbl) and the lowest level in 2016 (43 US$/bbl). The fluctuation in oil prices will affects the cost of investment (drilling and surface facilities) worlwide. Based on this condition, the standardization of the Investment Cost is needed to help the government and contractor in estimating the cost of investment in an oil and gas project. As per December 2018, there were 471 projects approved by the government of Indonesia and the 266 of them are projects that producing oil (oil projects) and gas (gas projects). In these projects, there are details of investment costs that are included in the economic evaluation. This paper will calculate and produce the Maximum Allowable Cost ("MAC") of surface facilities per boe (US$/boe) based on statistical analysis of 266 projects. Hopefully, this method can be used as a reference (guidance) in giving approval for the cost of surface facilities and providing an overview to contractors regarding the estimated MAC of surface facilities in an oil and gas project. For the purpose of this paper is, to divide the areas of Indonesia into 2 areas (Onshore and Offshore) which in each of these areas has 2 different types of projects (oil project and gas project). Then, to collect the data that related to cost of surface facilities and reserves and then the MAC of surface facilities per boe are calculated and produced using the Control Chart Analysis method. Lastly, the result will be distributed to those aforementioned areas. Based on the analysis of 266 Projects in Indonesia, the MAC of surface facilities per boe in Onshore area are 20.80 US$/boe (oil project) and 18.59 US$/boe (gas project), while the MAC of surface facilities per boe in Offshore area are 14.32 US$/boe (oil project) and 27.62 US$/boe (gas projects). In general, the MAC of surface facilities per boe still far bellow the oil price. Finally, this paper will show how to produce MAC of surface facilities per boe by using control chart analysis. This paper also expected to provide references for the government of Indonesia in giving approval to the cost of surface facilities proposed by contractors and provide contractors a quick look at oil and gas industry in Indonesia especially to those who plan to invest in Indonesia, and also help them create their petroleum exploration and exploitation strategy in Indonesia by considering on this information that will provide benefits for both government and contractor.