JAKARTA – On the surface, Indonesia’s decision to divide the Co2-heavy East Natuna gas field into three separate blocks is an effort to revive it as an economic proposition employing new carbon capture technology.
Beneath the surface, the move may also be aimed at resisting China’s efforts to enforce its illegal nine-dash line of territorial sovereignty over the maritime area situated at the southern reaches of the South China Sea.
With the D Alpha block as its centerpiece, the northern extremity of East Natuna lies 75 kilometers south of the Tuna Block, a smaller discovery close to the Indonesia-Vietnam maritime border which is now being developed in the face of Chinese ownership claims.
Indonesia and Vietnam last week concluded lengthy negotiations to delimit their overlapping Exclusive Economic Zones (EEZs), removing an irritant in their relationship but leaving unanswered questions over how they applied a median line to settle their differences.
The development of so-called carbon capture utilization and storage (CCUS) technology over the past decade could breathe new life into D Alpha, discovered more than 50 years ago at the height of the oil boom and last explored in October 1983.
The government has not mentioned any political motive behind reviving D Alpha, but the timing is compelling and appears to be a signal to Beijing that it is doubling down on its determination to protect its maritime sovereignty under the United Nations Convention on Law of the Sea (UNCLOS).
China is a signatory to UNCLOS, but it continues to insist on pushing its historic rights outlined by the unilateral nine-dash line that covers much of the South China Sea, despite an arbitral tribunal ruling at The Hague in 2016 that there was no legal basis to the claim.
In recent weeks, a Chinese Coast Guard (CCG) vessel has re-appeared in waters around the Tuna operation, where Britain’s Harbour Energy and Russia’s Zarubezhneft are working on a US$3.3 billion plan to export 100-150 million cubic feet (mcf) of gas a day into Vietnam’s offshore pipeline network 70 kilometers away.
It isn’t just any patrol craft. The 11,860-ton Haijing 3901, which left Hainan’s Sanya base on December 16 and entered Indonesian waters on December 30, is the world’s largest coast guard ship – and clearly assigned for a reason.
That makes it larger than a US Navy guided-missile cruiser or destroyer; although carrying a less lethal armament of 76 mm rapid-fire guns, two auxiliary guns and two anti-aircraft guns, it is more heavily armed than most other coast guard vessels.
Harbour Energy, which also has interests in the West Natuna Block and the Andaman Sea, was in the process of drilling two appraisal wells in mid-2021 when a CCG corvette approached the rig and instructed it to cease operations.
A subsequent seven-week intrusion by a Chinese research ship and two armed escorts and a follow-up message from the Chinese Foreign Ministry was the first indication Beijing intended to enforce the nine-dash line, which also encompasses East Natuna.
Indonesia did have some hint of looming trouble in 2017 when it changed the name of the waters north of its Natuna islands to the North Natuna Sea. The Chinese protested at the time, asserting that the two countries had overlapping maritime claims in the South China Sea.
The Indonesian government made no official protest during the 2021 incursion but instead announced plans to turn the North Natuna Sea into a special economic zone (SEZ) and to build new military facilities on the main island of Natuna Besar.
It responded to the latest intrusion by deploying a navy corvette, a CN-235 maritime patrol aircraft and a drone to monitor the Haijing, although a spokesman said it had not been doing anything “suspicious” while inside the EEZ.
“The development of the (East Natuna) block can be interpreted as a way for Indonesia to protect its sovereignty and sovereign rights against all forms of interference and threats,” energy security analyst Amelia Gustin wrote in a paper last year.
“(It) is an affirmation of the state’s presence in the outermost areas and a manifestation of the government’s commitment to positioning the outermost island (Natuna) as a front porch, not a backyard,” she said.
State-run oil company Pertamina is currently in the process of returning the East Natuna block to the government after keeping it under management since the last of a stream of would-be suitors walked away in 2012.
Officials believe time is short if D Alpha is ever to be exploited. “If we don’t do it quickly this time, forget it because in the next 10-20 years it will be time for renewable energy,” oil and gas director-general at the Ministry of Energy and Mineral Resources Tutuka Ariadji told reporters.
Containing 222 trillion cubic feet (tcf) of gas, of which 71% is Co2, Southeast Asia’s largest gas block has defied development since its discovery in 1972 by Italian explorer Agip, now a subsidiary of oil giant Eni, one of the few active multinationals left in Indonesia.
Agip drilled 31 wells through the 1970s before it relinquished D Alpha, leaving ExxonMobil to take over the property in 1980. The US firm drilled another five appraisal wells over the next three years, then nothing until it had its contract terminated in 2007.
In 2010, Pertamina signed an agreement with Exxon, Malaysia’s Petronas, Kuala Lumpur-based Carigali and French major Total to work together on the development of East Natuna, but that went nowhere either.
National Energy Council member Satya Yudha says that instead of developing the field in its entirely, splitting it into three will make it more cost-effective and allow companies to focus on both the oil and gas and new carbon capture markets.
When the ministry brings the 375 square-kilometer field to auction later this year, D Alpha will be bounded on its northern side by the Arwana Barakuda block and by the Paus block on the southern side.
Officials say they have already had expressions of interest from Zarubezhneft and Petronas, which recently embarked on a CCUS venture for the second phase of its Kasawari gas project, teaming up with Japan’s Mitsui to ship liquified Co2.
But industry experts warn that D Alpha presents a particularly expensive challenge because of the presence of 0.5% of hydrogen sulfide (H2S), a corrosive, highly toxic gas that requires special equipment to be handled safely.
Key to East Natuna’s commercial natural gas potential appears to be the Sokang block, lying 100 kilometers to the south of D Alpha, where Medco, Indonesia’s largest private resource company, is sitting on a confirmed 2.3 tcf of isolated reserves.
Medco bought the block in 2019 from Black Platinum, a joint venture between Singapore’s Temasek and the US-based Fortress Investment Group, but has done little with it since then, concentrating instead on acquiring ConocoPhillips’ Corridor production block in South Sumatra.
Experts say an additional 1-2 tcf from East Natuna would justify piping the gas either to Java, or 400 kilometers to the West Natuna Block, a series of fields which has supplied gas to Singapore through Medco’s 650-kilometer pipeline since 2001.
They point out that Zarubezhneft’s interest may stem from an expectation that the gas could be piped the even shorter distance to Tuna, where it would plug into the planned cross-border pipeline to Vietnam’s Nam Con Son network which will be completed in 2026.