DEVELOPING NEW DISTRIBUTION PIPELINE PROJECT BY IMPLEMENTING COST EFFICIENCY STRATEGY USING CAPITAL BUDGETING MODEL: A CASE STUDY IN GREENLAND INTERNATIONAL INDUSTRIAL CENTER (GIIC)

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Agitarini, Dyah and Daryanto, Wiwiek Mardawiyah (2018) DEVELOPING NEW DISTRIBUTION PIPELINE PROJECT BY IMPLEMENTING COST EFFICIENCY STRATEGY USING CAPITAL BUDGETING MODEL: A CASE STUDY IN GREENLAND INTERNATIONAL INDUSTRIAL CENTER (GIIC). South East Asia Journal of Contemporary Business, Economics and Law, 17 (3). pp. 13-19. ISSN 2289-1560

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Abstract

Oil and gas industry has an important role in developing economies all over the world including Indonesia. This industry gives huge contribution in the country revenues. However, the contribution from this industry has decreased significantly during 2014 to 2015, since 2015 the revenues has decreased significantly from 14.11% in year 2014 to 4.46% in 2015 (PwC Indonesia, 2018). This condition is caused by the dropping of crude oil price, since the end of years 2015 the crude oil price dropping significantly from about 100 USD per barrel in years 2011 until 2014 changes to 30 USD per barrel in 2015 (MIGAS, 2015). That condition has impacted the oil and gas industry in Indonesia, many companies have to reconstruct their spend and also delaying the new development projects that is not economical anymore. PT XYZ (“XYZ”) as a subsidiary of one state-owned company that specialized in the gas distribution and natural gas industries facing the same conditions with other oil and gas companies. The revenue of XYZ decreased from USD 2,896 million in 2014 to USD 2,571 million in 2015 and to USD 2,499 million in 2016. In order to increase the revenue, XYZ has to develop the potential market by developing new distribution pipeline project with cost efficiency. In 2016, XYZ has an option whether to install the existing pipeline which is steel pipeline, polyethylene pipeline or polyamide pipeline system for the future project, the object of the project location is in Greenland International Industrial Center (“GIIC”). The purpose of this study is for analyzing and evaluating which options results cost efficiency for XYZ using a steel pipe or by using another pipeline system which polyethylene pipeline or polyamide pipeline system. The data are analysed by using a capital budgeting model with these criteria: 1) Payback Period; 2) Return on Investment; 3) Net Present Value; 4) Profitability Index; 5) Discounted Payback Period; 6) Internal Rate of Return and the data that used for this analysis is collecting by XYZ in 2016. The analysis and calculation result showed that by using a polyethylene pipeline, XYZ will generates more cost efficiency for the company. Keywords: Oil & Gas, revenue, cost efficiency, capital budgeting, Payback Period

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Divisions: Research And Community Empowerment > Journals
Depositing User: Rizky Amalia
Date Deposited: 17 Jan 2020 09:53
Last Modified: 22 Dec 2021 03:56
URI: http://repository.ipmi.ac.id/id/eprint/424

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