1. Christine L. Wowor clwowor@gmail.com
Investment Management of Petroleum Fund in Indonesia on Exploration and EIOR with System Dynamic Model
Christine L. Wowor

2. Motivation Challenges in Indonesia energy security:
Highly dependent on fossil fuels
Reserves replacement lower than produced volume
Indonesia mature fields is less than 1% world reserves
Decreasing trend of exploration investment
Draft Revision of Oil and Gas Law No. 22/2001 suggested an allocation of Petroleum Fund

3. Research Objectives
To assist the Government of Indonesia measuring the benefit of investing the allocated Petroleum Fund in Oil and Gas exploration and EIOR (Enhanced and Improved Oil Recovery) towards :
Indonesia oil and gas reserves and production
Revenue of GoI and Growth of the allocated Petroleum Fund
Potential development of supporting industries
This research can be used to model the alternative management of petroleum fund in other countries
43 petroleum fund out of 123 sovereign funds

4. Research Scope
Indonesia 1/1/ 2016 Proved Oil and Gas Reserves and Identified Resources with 5% of GoI revenue allocated as Petroleum Fund
The Allocated Petroleum Fund in period will be invested in Exploration and EIOR activities in Indonesia
Indonesia third generation of PSC as the references for commercial elements representing exploration in frontier eastern area and EIOR activities in western area
Utilization of system dynamic model that represents relationship among work programs and commercial components.

5. System Dynamics in World Energy Model
Roger Naill on Hubbert King Theory
Source:
Intellectual Lineage of System Dynamic Energy Model
Source: c

6. Indonesia E&P Business Process
Current Business Process
Proposed Business Process

7. Indonesia Exploration Potential
Source: SKK Migas
Eastern Indonesia Portfolio – Wood Mackenzie
Seismic Cost in Eastern Indonesia
Economical volumes requires 1.25 TCF finding. Correlatably $30/MMCFD seismic cost

8. Indonesia EIOR Potential
Indonesia Oil in Place Volume
1/1/2014 Reserves
Source: SKK Migas
EIOR Distribution
Source: SKK Migas
EIOR campaign in 15 fields in Indonesia indicated 0.4 – 4.6 BBOE EIOR potential but economic screening indicated $70/BBL oil price environment to make it economical project and 13 of 15 fields are with less than 5 years expiring PSC.
Petroleum Fund can be used to cover 30% of OPEX (USD $4/BO EIOR cost) by funding EIOR pilot project or developing domestic chemical industry
Source: SKK Migas

9. Indonesia E&P System Dynamic Model
Stock :
Proved EUR
Cumulative Production
Exp Prod Add
EIOR Prod Add
Flow:
Annual Production
Exploration Proved EUR Add
EIOR Proved EUR Add
Auxiliaries:
Existing Proved
Exploration and EIOR Prod Add
Government Revenue
Petroleum Fund
Investment split on Exploration and EIOR
Exploration Finding Cost & Lag Time
EIOR Field Trial Cost and Lag Time
Constant:
Gas Price
Tax

10. Scenario and Results
Incremental exploration and EIOR incremental production profiles have considered actual field performances
100% EIOR investment bringing 2.2 BBOE of additional production from existing proved OOIP and extend up to 30 years production.
100% Exploration investment will bring 266 TCF proved gas development escalating gas production 7 times current production rate

11. Analysis Results
Allocating 5% of GoI revenue from 1/1/2016 Proved Oil and Gas Production would collect 11.3 billion USD of NPV Petroleum Fund
Application of signing bonus on the awarded exploration area and DMO in the 3rd year of EIOR production will gain back the invested Petroleum Fund in
The investment will extended stream of revenue from improved oil and gas production and growth to the original value of Petroleum Fund up to 50 – 100% original net present value

12. Recommendation
25% Exploration and 75% EIOR scenarios considered the best option:
Allocate enough investment on Eastern Indonesia exploration and prove 61 TCF of gas reserves
Produce 1.6 BBOE incremental reserves from existing proved oil production and extending the proved oil production by 25 years
Contribute 14% higher GoI from E&P business and create 50% growth of the allocated petroleum fund
Multiplier effect of domestic chemical industry development, seismic activities and developing the economy in eastern Indonesia

13. Further Study
Include the renewable energy and gas infrastructure development as part of Petroleum Fund investment options
Measure the impact of the recently introduced gross split contract system

14. Thank you