JAKARTA – Ripples from the Russia-Ukraine war are being felt in far-off Indonesia, with sanctions threatening the future of a US$3 billion joint natural gas project in the North Natuna Sea and misbehaving Russian visitors in danger of losing Bali as a popular safe haven.
For British firm Harbour Energy, the boom may be about to be lowered on its newly discovered Tuna block, close to Indonesia’s maritime border with Vietnam, because of its 50% partnership with Russia’s state-owned Zarubezhneft oil company.
“Work on the project has now largely been suspended as a result of European Union (EU) and United Kingdom (UK) sanctions imposed on Russian entities,” Harbour Energy told Asia Times in a statement.
“Those prevent us working with our current joint venture partner in Tuna, a Russian company, in many of the areas needed to progress an upstream development project. We are continuing certain limited activities on Tuna that are permitted by law.”
Upstream regulator SSK Migas had approved Harbour’s plan of development last December, but in its annual report earlier this month the firm said it had to “restrict our ability as an operator to provide certain services to our Russian partner.”
It now appears Harbour will have to delay reaching a final investment decision (FID) by the end of this year. “We have advised SKK Migas of the status of the project and are working constructively with all parties to find a solution so the project can progress,” the statement added.
What that may be remains unclear. “The solution will be for the Russians to sell, but even that may be a problem for anyone who buys it,” said one oil and gas consultant. “Transferring money to the Russians would be considered a breach of sanctions. It’s a nightmare.”
Under current plans, gas from Tuna’s 470 billion cubic feet field is to be piped 70 kilometers across the border into Vietnam’s existing 325km-long Nam Con Son offshore pipeline system, a joint venture between Petrovietnam and Rosneft, a second Russian state firm.
Ironically, it is the presence of Zarubezhneft that may have given China some pause in pressing its illegal claim to ownership of the Tuna block, which lies inside Beijing’s nine-dot line of supposed territorial sovereignty where it intrudes into the Indonesian EEZ.
Harbour discovered the Tuna field in 2014 and was in the process of drilling two appraisal wells in July 2021 when a Chinese Coast Guard vessel approached the firm’s semi-submersible rig and told it to cease operations.
That and a subsequent message from the Chinese Foreign Ministry was the first Indonesia realized that Beijing was intent on enforcing the unilateral nine-dot line that lays claim to most of its South China Sea backyard.
Over the next seven weeks, a Chinese research ship and two coast guard cutters carried out an extensive seabed survey around the rig in a clear attempt at intimidation, despite the presence of Indonesian Navy vessels.
The government made no official protest and the project remained on track, with SSK Migas chairman Dwi Soetjipto declaring last January that apart from its economic benefits Tuna would serve to underline Indonesia’s maritime entitlements.
Describing it as “one of the world’s geopolitical hotspots,” he added: “The Indonesian Navy will participate in securing the project so that economically and politically it becomes an affirmation of Indonesia’s sovereignty.”
Although Tuna’s future may now be in doubt as long as the Ukraine war continues, the same sovereignty objective lies behind Jakarta’s recent decision to divide up its giant D Alpha gas block, which also lies within the nine-dot line.
By doing so, it believes the division will make it easier to develop fields around the fringes of a block that has defied exploitation for 50 years because of the presence of huge, unmanageable quantities of Co2. It will also lay down a marker.
One of only a handful of foreign companies still actively exploring in Indonesia, Harbour is still committed to an expanded drilling program in the Andaman Sea that has yet to deliver on its early promise because of low permeability issues.
Harbour drilled an initial exploratory well 150kms off northern Sumatra last July and despite Britain’s new windfall tax eating up its 2022 profits, it has scheduled a further three wells in the second half of 2023. The Andaman is, in fact, a new gas frontier.
After Spanish company Repsol drilled a dry hole in a neighboring basin, that may go some way to determining whether the Andaman is, in fact, a new frontier with earlier anticipated reserves of 4-5 trillion cubic feet.
In Bali, Governor Wayan Koster wants the government to revoke the visa-on-arrival policy for Russian and Ukrainian tourists who have established themselves in enclaves and have been either overstaying or are involved in dubious activities.
Ukrainian Ambassador Vasyl Hamianin is unhappy that his besieged countrymen have been lumped in with the Russians, describing it as a “very unfriendly decision” when Ukraine is swamped by refugees resulting from the ongoing war.
It is not clear how the new visa restrictions would affect 23,000 Russians among the 110,000 foreigners who lived in Bali through the Covid-19 pandemic, either as so-called digital nomads or small business investors eligible for long-term visas.
Not all the flood of newcomers are trying to escape conscription. Bali and the southern Thailand resort of Phuket have long been popular with Russians seeking to get away from the harsh north European winters.
“They don’t feel comfortable in their countries,” Koster told a news conference, noting that Russians and Ukrainians are responsible for the highest number of visa and traffic violations and other criminal offenses. “Many of them come to Bali not for leisure, but to be more comfortable and look for work.”
Immigration Department data shows that 43,622 Russians arrived in Bali in the first three months of this year, compared with 59,854 for the whole of last year, a sign that the exodus linked to the ongoing Ukraine conflict is continuing to grow.
Thailand, with its booming tourist industry and looser visa regulations, has become an even more popular destination. Between November 1, 2022, and January 21, 2023, 233,000 Russians landed in Phuket on mostly direct flights from Moscow.
As they did in earlier years in Pattaya, the beach resort on the Gulf of Thailand, they are reportedly buying up off-plan condominiums, either as a holiday home or as a refuge if they are eventually forced to flee their homeland.
Pattaya became a Russian enclave – and notorious mobster sanctuary – in the early 2000s, but the collapse of the ruble in 2014 forced them to flee in droves, leaving behind scores of empty high-rises and palatial, partly-built houses.