In early 2016, the oil price has fallen to its lowest level (31.68 US$/bbl) over the last 11 years. Since then, Improved Oil Recovery (IOR) Projects are no longer quite interesting economically for contractors due to the high cost of development.

Until August 2016, there were 407 Field Development Plans approved by the Government of Indonesia and 26 of them are already using IOR methods (waterflood and steamflood). In Indonesia, these methods have been applied in Sumatera and Kalimantan. Currently, the biggest oil recovery is employing the steamflood of the IOR methods, which is operated by Chevron Pacific Indonesia in Sumatera Island since 1981 and it has contributed approximately 40% of the total oil production in Indonesia.

In countries that adopt Production Sharing Contract Fiscal Regime such as Indonesia, there are a number of terms and conditions specifically intended for IOR Projects. To attract and help contractors, they will be given an investment credit and/or interest of cost recovery so that the IOR projects can be developed more economically. Moreover, there are some tools which these contractors may use to improve the economical nature of their projects, such as DMO Holiday, Depreciation Acceleration, Shared First Tranche Petroleum, Split Changes, and many more.

For the purpose of this paper, the geographical areas of Indonesia were divided into 3 different IOR areas (North Sumatera, South Sumatera, Kalimantan). Then, collect the data of the 26 IOR Projects and afterwards the Profitabilty Index and Development Cost were calculated and distributed to those aforementioned areas.

Based on analysis, the results shows that the lowest profitability index is equal to 1.04 while the highest one is 2.28 equal to, meaning that these projects generate positive revenue to the contractors (PI value by > 1). The average development cost of IOR projects in Indonesia is equal to 34.64 US$/bbl, which remain lower than the current oil price. Based on the obtained Profitablity Index and Development Cost above, it can be concluded that the Indonesian IOR Projects are economically acceptable.

Finally, it is expected that this paper will provide contractors with a quick look at the growth of IOR Projects in Indonesia, especially in terms of the analyses of the economical nature required in Indonesia. Moreover, this paper is expected to provide an insight into the flexibility of PSC fiscal regime that can be used to support the economical nature of the IOR projects executed by contractors.


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