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Petroleum System Risk Quantification for PSC Investment in Indonesia’s LNG Sector
Abstract
Investment decisions in upstream oil and gas sector of Indonesia often involve acquiring stakes in existing Production Sharing Contract (PSC) areas. Such decisions require careful assessment of geological uncertainty, economic viability, and regulatory constraints. For investors evaluating PSC blocks, a robust understanding of regional geological risk within the petroleum system is critical. This study introduces a practical and scalable geological risk quantification framework to support upstream investment decisions in the LNG sector in Indonesia. The framework is designed for application under the current fiscal regime and can be effectively implemented even when data availability is limited, such as when relying on information from the Migas Data Repository (MDR). Recognizing that early-stage opportunities often involve significant geological uncertainty, we developed a tailored petroleum system risk metric comprising five parameters: source rock, trap, dynamic
factors, reservoir conditions, and subsurface issues. The framework was applied to five PSC blocks using Multi-Attribute Utility Theory (MAUT), integrating operator-specific economic indicators (Net Present Value, Internal Rate of Return, Payout Time, and Profitability Index) alongside CO₂ emission intensity. Monte Carlo simulations were conducted to evaluate investment rankings under uncertainty. A key finding is that the proposed risk quantification approach is simple enough to be implemented with limited MDR data, yet robust enough to support investment strategy. Furthermore, the framework builds upon and complements existing standardization efforts
by the regulator, SKK Migas, offering a practical tool for upstream investors in an evolving regulatory landscape.
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