August 11, 2025

Evaluating an Investment Decision in Oil and Gas Development Pt Xyz – A Case Study

BNBon Hoffer Nainggolan IMIsrochmani MurtaqiBandung Institute of Technology SDSylviana Maya DamayantiBandung Institute of Technology

Key Points

The project has an NPV of USD 170,095,470, suggesting it is financially viable for investment.
With an IRR of 28%, the investment in secondary oil recovery shows strong potential for profitability.
Conducted analysis incorporates Net Present Value and Profitability Index to evaluate project feasibility.
A sensitivity analysis was performed to determine the project’s resilience to changes in relevant investment parameters.

Abstract

Pt xyz as the main contributor of national oil production tries to increase the oil production by developing existing reservoirs using secondary oil recovery method in order to meet the demand for oil from Indonesian people. The implementation of the oil recovery method requires a lot of investment which is 624,021 million USD. Because of that the financial feasibility of investment must be conducted. Financial feasibility will be reviewed according to a capital budgeting framework to accept or reject a project, based on Net Present Value (NPV), Internal Rate of Return (IRR), Discounted Payback Period (DPP), Payback Period (PP), and Profitability Index (PI). Based on a 9, 64% weighted average cost of capital, the NPV of the project is USD 170.095.470, DPP is 4, 26 years, PP is 3, 80 years, and PI is 1,290. Additionally, the project has an IRR of 28%. A sensitivity analysis is also conducted in this study to evaluate projects resilience should the relevant parameters change in

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