Articles

Project Financing Strategy in the Oil and Gas Downstream Industry (Case Study: The Integrated Oil Refinery and Petrochemical Plant Project at PT ABC)

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The global oil refinery industry faces challenges such as crude oil price volatility, environmental awareness, and renewable energy trends. Indonesia’s oil consumption is increasing, reaching 1580 million bpd in 2022, but the country heavily relies on imports for domestic demand. The petrochemical industry, crucial for the downstream plastic industry, is forecasted to grow at a 5%-6% rate between 2022 and 2031. However, domestic production capacity is lower than demand, and Indonesian manufacturers are few. PT ABC, a joint venture between Indonesia’s State Own Enterprise and European oil and gas companies, plans to build the first integrated oil refinery and petrochemical complex in Indonesia. This integration will provide economic benefits by sharing feedstocks, products, and utilities, and saving energy costs. However, significant capital investments are required. The research is performed to analysis the feasibility of the capital investment project and to evaluate potential source of fund to finance the project, such as shareholder’s equity, bank loans, and corporate bond. The research will determine the NPV, IRR and Payback Period of the project and compare it from different source of funds. The research performed also evaluate several factors that could influence feasibility of the project. As the result, it shows that at discount rates of 8%, 10%, and 12%, the project is feasible. However, volatility of the crude oil price will give significant impact to the project’s feasibility. In addition, it also recommends PT ABC to choose a mix financing between international bank loans and shareholder’s equity at a 60:40 ratio.

Business and Financing Strategic in Entering a Biomass New Business (Case Study: PT ABC, in West Java)

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Biomass is a renewable alternative fuel source that is more environmentally friendly than other fuels. Currently PT ABC has a biomass plant that produces wood chips and wood pellets in the West Java region. The purpose of this study is to analyse the business strategy and funding needed by PT ABC to enter the biomass industry in West Java. The research method used is a combination of descriptive and case study methods, with data collection through interviews, document analysis, and direct observation. SWOT, PESTEL, and Porter’s Five Forces analyses were conducted to evaluate the company’s internal and external situation. Furthermore, this research designs the right funding strategy based on 5 funding alternatives sourced from venture capital, Angel Investors, Banks, IPOs and Bonds. Based on the comparison results, alternative 3 (Bank Loan) is more profitable. This alternative provides NPV of Rp 8,503,386,171.21, Internal Rate of Return (IRR) of 31%, Payback Period (PP) for 4 years. This alternative will increase the value of the company in several ways such as diversification of financial risks, tax benefits on interest payments, guaranteed retained earnings, quick disbursement of funds, and maintaining the balance of shareholders’ equity. The findings of this study highlight the huge potential of the biomass market in West Java and Indonesia, and the importance of an appropriate funding strategy. This research provides valuable insights for companies looking to enter the biomass industry.