Market Survey on the Addition of Cilegon Fuel Gas Compression Capacity as the Sourcing Best Practice of EPC Small Scale Project

Abstract

Small EPC project will not be economical if the owner use the same approach in developing project design or planning documents as if it is large scale EPC project. The development of procurement planning documents such as feasibility study, term of references and bidding documents in large scale EPC project usually will be supported by at least one international consultancy firm. This is to ensure the quality of the procurement planning documents. It can cost the owner up to several hundred thousand U.S. dollars per document, but it only have small amount of percentage compared to the total project cost. In small EPC project, this cost will have much bigger percentage. The method proposed to develop procurement planning documents for small EPC project is by doing market survey or market sounding mechanism. This method is similar to pre-qualification of bidders but it is emphasized more on technical and financial matters than administrative qualification. In this study, we hypothesize that the project chosen as the best solution will be found among several project alternatives, and we use financial indicator analysis method to test this hypothesis. A case study on how this method implemented can be seen at fuel gas compression capacity addition project in Cilegon combined cycle gas turbine, Indonesia. This method is successfully helping the plant management to develop procurement planning documents independently. This method is also useful to build an analysis of which project financing is more preferable. Market survey on the project provides data which helps owner to determine whether using direct investment or build-own-operate (BOO) or build-operate-transfer (BOT) to finance the project. In the case of the Cilegon compressor project, it was found that BOO project financing was the best project solution that provided the highest IRR of 11.9%.