Green Economy Evaluation of EOR Projects in Borneo Field: Case of CO2 Injection vs Chemical Injection

Abstract

PT Borneo Petroleum Company (BPC) as one of the biggest oil and gas company in Indonesia is planning to perform Enhanced Oil Recovery in Borneo Field. It is considering performing chemical injection (CEOR) or CO2 injection. As CO2 injection requires bigger capital investment than CEOR, it becomes less favorable. However, as the campaign for Net Zero Emissions surges and the planning from the government to implement the carbon tax in Indonesia, the company must revisit the economic evaluation of the projects by introducing carbon tax in the calculation. This research uses capital budgeting techniques in evaluating the projects. It is also used to evaluate the impact of green economy implementation to the project valuation. It needs to show whether the projects are feasible with conventional capital budgeting and with green budgeting. The expected finding is that the economic value of CO2 injection will improve significantly and will make it more attractive than CEOR. This study assumes that the carbon tax applied in Indonesia is at US $ 5.25 per ton CO2-equivalent. The CO2 injected is constant at 8.5 MSm3/d. It is also assumed that BPC is adopting the same capital structure as its parent company. The emissions associated with the project is calculated as the function of production rates. The project’s profitability is based on the Net Present Value, Internal Rate of Return, Profitability Index, and Payback Period. Sensitivity analysis is also performed to explore the variables which give significant impact to the project valuation. Monte Carlo simulation is also performed to test all possible scenarios and its impact to the NPV. It is found that the impact of carbon tax is not significant to the economic value, in contrary the potential for additional incentive in terms of Result Based Payment for Carbon Capture Utilization and Storage has significant impact to the economic value of the project. The result is used to make decision on which EOR method to be applied which create more value to the company in terms of economic and sustainability.