W15_TH_Investing vs Renting vs Leasing Studies for Gas Transport Module (GTM)

1. Problem Definition

One of the critical phases on gas station project is commissioning phase. If the gas station not already connects with gas pipeline, gas station will commission using gas from Gas Transport Module (GTM). Gas will directly inject to scrubber. GTM also have function for deliver gas from mother station to daughter station. Author Company`s will assess the most economical way to use from GTM.

2. Development of feasible alternatives

Alternatives for GTM:

  1. Investing new GTM and commission by company resources
  2. Hire third party specialize on GTM for commissioning phase
  3. Leasing GTM as commission tools and commission by company resources

It is important to choose which most efficient way to commission gas station, especially with numerous number of gas station project.

3. Possible Solution / Alternative

Calculation of investment, maintenance cost, operating cost and rent cost based on inquiry from GTM Vendor for new equipment or leasing and Third Party specialize in this field.

4. Selection of Criteria

The acceptance criterion is the option with lowest total net worth.

5. Analysis and Comparison of the Alternatives

Table 1. Summary result of investing, renting, and leasing (Operating Lease Scenario) data

The scenario for leasing is “Operating Lease”, with lease rental payment is 65% of investment price, based on internal author company data.

Table 2. Book Value at the end of life time, using Straight Line Depreciation

Calculation summary :

Table 3. Present Worth for Purchasing

Table 4. Present Worth for Renting

Table 5. Present Worth for Leasing

Table 6. Calculation Net Worth Purchase, with MARR 14%.

Author use MARR 14% based on Lita Liana paper that concludes range of MARR in oil and gas project is 14% to 34%.

6. Selection and Preferred Alternatives

Table 6 show that total cost of leasing GTM is the lowest. For long term use, leasing GTM is the most efficient way.

7. Performance Monitoring and the Post Evaluation of Result

It is recommended to review feasible leasing alternatives, and conduct performance equipment monitoring. For example Net lease scenario, where the payment not include maintenance and insurance, or Capital Lease scenario, where we can buy the asset at the end of lease term.

 

References

  1. Sullivan, G. W. (2014). Engineering Economy 16th Chapter 2,5 and 7, pp. 71-73, 213 – 215 and 332 – 337
  2. Adhi, Oktafianto. (2017). W3_OAN_ Investing vs Renting vs Leasing Studies|Emerald AACE 2018. Retrieved from http://emeraldaace2017.com/2017/08/15/w3_oan_investing-vs-renting-vs-leasing-studies/
  3. Liana, Lita. (2014). Using Analytical Hierarchy Process to Determine Appropriate Minimum Attractive Rate of Return for Oil and Gas Projects in Indonesia, PM Word Journal Vol. III. Retrieved from http://pmworldjournal.net/article/using-analytical-hierarchy-process-determine-appropriate-minimum-attractive-rate-return-oil-gas-projects-indonesia/?lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3Bzx66NZmmQrKJ3%2BZJpWDqkw%3D%3D
 

1 thought on “W15_TH_Investing vs Renting vs Leasing Studies for Gas Transport Module (GTM)”

  1. Excellent posting as usual Pak Tommy!!! This is not something that most owners face but for us contractors we are ALWAYS agonizing over the question whether to rent (short term), lease (longer term) or purchase (long term)

    Keep on posting these really great topics……

    I look forward to seeing them each week…

    BR,
    Dr. PDG, Jakarta

     

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