The Application of Capital Budgeting Model for Cost Efficiency in Distribution Pipeline: Case Study in Greenland International Industrial Center (GIIC) Area - Block B

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Irawati, Wuriana and Daryanto, Wiwiek Mardawiyah (2018) The Application of Capital Budgeting Model for Cost Efficiency in Distribution Pipeline: Case Study in Greenland International Industrial Center (GIIC) Area - Block B. International Journal of Business, Economics and Law, 17 (2). pp. 29-35. ISSN 2289-1552

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Oil and gas sectors contribution to Indonesia's revenue has declined from 14.11% in 2014 to 4.46% in 2015. There are several challenges facing the oil and gas sector, including the decrease in resources and the increase in operational cost. Moreover, in 2017, the Indonesia natural gas industry is subjected to new Government regulations from the Ministry of Energy and Mineral Resources (MEMR), which regulate: the price, revenue cap, IRR cap, and transparency. PT Perusahaan Gas Negara Tbk (PGN), a subsidiary of one state-owned company that specialized in the natural gas transportation and distribution in Indonesia, also has experienced some challenges in 2016 whether caused by internal or external factors which affected to its business performance. The revenue of PGN has decreased from USD 2,896 million in 2014 to USD 2,571 million in 2015 and to USD 2,499 million in 2016. Furthermore, PGN should conduct internal efficiency. In 2016, PGN has an option to install alternative materials, polyethylene pipeline or polyamide pipeline, to replace steel pipeline, the existing pipeline material. This study is expected to suggest in choosing and deciding which options will contribute the highest cost efficiency for PGN by using new gas pipeline material whether to use polyethylene pipeline (PE) or polyamide pipeline (PA) as an alternative to replace the existing steel pipeline for developing the future projects. The project location object for the study is in Greenland International Industrial Center (GIIC) Area-Block B, Karawang, West Java and primary data were collected in year 2016. The capital budgeting model used to analyze data and indicators are Payback Period (PP), Return on Investment (ROI), Net Present Value (NPV), Profitability Index (PI), Discounted Payback Period (DPP), and Internal Rate of Return (IRR). The finding shows that PE is more efficient than PA and is able to be implemented in GIIC Area-Block B, Karawang project if the gas pressure requirement is less than 10 barg. Keywords: Capital Budgeting; Cost Efficiency; Distribution Pipeline

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Divisions: Research And Community Empowerment > Journals
Depositing User: Rizky Amalia
Date Deposited: 21 Jan 2020 10:20
Last Modified: 22 Dec 2021 04:43

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