Oil price has been fluctuating since the global economic crises end 2008. However, the oil price in general is stabilizing at about US$ 80 per barrel. This price level is able to drive explorers to drill more wells. Many investors came to me and asked how to develop oil blocks in Indonesia. The most common decision to be made is to acquire a producing block or to apply KSO to Pertamina. KSO is a kind of Joint Operation to develop old fields formerly operated by Pertamina. Pertamina is a state oil company in Indonesia.
When a company has to decide acquiring an oil block, the company has to value the block. Please find a very simple calculation to give you a block value.
1. Assume Oil price per barrel is US$ 80
2. Operating Costs in general in Indonesia say about US$ 20 per barrel
3. Gross Margin should be US$ 80 - US 20 = US$ 60
4. Profit Sharing in Indonesia Government Tax system for KSO is about 10 % net to the partner.
5. Profit Sharing for the companuy is therefore about 10 % x US$ 60 = US$ 6 per barrel.
6. If you make Discounted of the Profit sharing, the Discounted Value should be less than US$ 6.
7. Assume the total discounted value is about 50 % from the cashflow during 20 year contract period than the Net Presenta Value per baerrel is about US$ 3 per barrel remaining reserves
I hope the very rough calculation above could help you estimating the block value during your negotiations.
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