W7_Candra Nugraha_Cash Flow Analysis


Opportunity Statements

To anticipate the production increase from some new wells which recently drilled, some scenarios have been developed with regards to Gathering Center capacity.

 The current GC cannot accomodate some issues regarding the associated gas in production fluid.

Root Cause

  • There are 4 scenarios to be evaluated in terms of Cash Flow Analysis to determine more benefit to the stake holders.
  • The associated gas in Gathering Center is analyzed whether burned (additional Flare Stack Package) or own used (additional Fuel Gas Package).

Develop Alternatives

Development of the outcomes

The Force Field Analysis is developed as per below:

Minimum Acceptable requirements

The criteria of economic selection are:

  • The Highest Net Cash Flow and NPV.
  • Life Time is predicted for 11 years.
  • NPV calculated at 12% Discount.

Analyze and compare the alternatives

Based on the alternatives as given, we come up with the preliminary economic calculation  as per below table:

Develop preferred alternative

Scenario: Upgrade Gathering Center + Fuel Gas Package – Placed Into Service on 1 Oct 2011, is this worth Doing?

Estimated revenue generated as calculated Net Cash Flow is US$ 1,450.8 million for 11 years operation. NPV @ 12% discount is equal to US$933.4 million. 

The following summaries the information considered before it made as Go or No Go Decision:

 Const is mitigated under Risk Register.

Monitor and Evaluation (Post Mortem)

After the Authorization for Expenditure (AFE) is approved, the following Success Planning is monitored and shall be achieved.

Success Metrics

  • Spills – zero.
  • Industrial Accident / LTI  – zero.
  • Cost performance – +/- 10% of budget.
  • Schedule performance – +/- 10% of milestone dates.

 Success Factor

 The following action items are a must for achieving the Success Metrics above:

  • Good team work & coordination – meet on regular basis, good cross functional participation and good team commitment.
  • Follow the project management practices.
  • Follow HES procedures and approved standards & codes.
  • Utilize VIP’s & Best Practices.
  • Involve the right resources (e.g., contract development).

 References:

  1. Peters, Max S & Timmerhaus, Klaus D. (1991), Plant Design and Economics for Chemical Engineers 4th Edition, Singapore: McGraw-Hill, Inc.
  2. Sullivan, William G., Wicks, Elin M. & Koelling, C. Patrick (1942), Engineering Economy 15th Edition, Singapore: Prentice Hall, Inc.
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About Candra Nugraha

I'am living in jakarta, indonesia
This entry was posted in Candra Nugraha, Group Member, Week #7. Bookmark the permalink.

One Response to W7_Candra Nugraha_Cash Flow Analysis

  1. DrPDG says:

    Absolutely AWESOME, Mas Candra!!! WOW!!!

    Couple of questions that you might want to consider answering in follow on postings:
    1) I don’t see the investment costs included in the calculations? How much does the upgrade vs new plant cost? And why wasn’t the cost factored into the equation?

    2) Where did the 12% come from? Is that the WACC or the MARR? For future postings, it might be interesting to show how or where that number was derived.

    Otherwise, you are exactly on track and I would only hope that you are mentoring others in writing their blogs……

    Keep up the excellent work, Mas Candra!!

    BR,
    Dr. PDG, Lagos, Nigeria

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