Volumetric and Economy - Consideration of Gas Field Development in the Andaman Sea – Offshore Aceh

Abstract

This modeling is a simulation study bridging the prespective  of the micro-corporate aspect vis a vis  the government's macro interests in monetizing gas in the Andaman Sea border region of Aceh. The yardstick hurdle for investors in the upstream Production Sharing Contract (PSC) to go or not for a project is the Internal Rate of Return (IRR), or Minimum Accepted Rate of Return (MARR). However, the government's interests are beyond that. The macro and long-term comprehensive objectives are  justified  on cost benefit analysis. Among other things, the Government instrument in public policy of PSC are fiscal terms contracts, taxes and gas pricing. The case study was carried out using quantitative method.  The area of study is in the North Sumatra Basin (NSB), a rich basin  in the Andaman Sea – offshore Aceh, in a frontier exploration area where the play concept has yet to prove. Estimated Ultimate Recoverable (EUR) volumetric is derived by Monte carlo probabilistic approach. Decision tree analysis result suggests that the development of a gas is better on partial stage when uncertainty is considerably high existed.  The sensitivity analysis shows that the gas price element is the most sensitive parameter, compared to other policy instruments. Pareto efficiency is obtained at the point where the fiscal terms, gas prices and taxes are set in such a way that provides optimum compromise benefits to the stakeholder parties comprise of corporations, the government and the local economy. However, delays in taking and executing a decision will have a detrimental impact on the IRR Contractor and also to all other beneficiaries.