Harbour Energy is looking for a new partner for the Tuna Block in the Natuna Islands after Zarubezhneft plans a divestment.
Previously, the Energy company from Russia Zarubezhneft through its subsidiary ZN Asia Ltd and Harbour Energy from England through its subsidiary Premier Oil Tuna BV had participating rights of 50% respectively to operate and develop the Tuna Block in the South China Sea.
However, several complications with Zarubezhneft have hindered the development of the joint project.
International complications hits Zarubezhneft in the Tuna Block
The decision to divest in the Tuna Block by Zarubezhneft was due to complications arising from sanctions imposed by the European Union and the United Kingdom regarding the Russia and Ukraine War. This complication causes delays in joint project development.
“Russia’s ZN [Zarubezhneft] is developing an ongoing project. Harbour Energy will look for a new partner, although the identity is not yet known,” said Benny Lubiantara, Deputy for Exploration, Development and Management of Work Areas of the Upstream Oil and Gas Business Regulatory Working Unit (SKK Migas), on 18 July 2023.
However, progress on the project was affected by EU and UK sanctions against Russia, which limited their ability to provide certain services to Russian entities.
Financial problems of the Tuna Block
Meanwhile, there is a financing problem that hinders the Tuna Block development plan. Oil and gas cost recovery contracts require all project financing to be shared by participating interest holders.
The estimated investment cost for the development of the Tuna Block is US$ 1.05 billion (excluding sunk costs), operating costs are US$ 2.02 billion, and site abandonment and restoration (ASR) costs are US$ 147.59 million.
Block Tuna has a high risk profile
The Tuna Block is located on the border of the South China Sea and poses a high risk. Previously, exploration activities were often disturbed by the Chinese Government.
Several times Chinese coast guard vessels have come very close to the Tuna Block drilling area, which has prompted Indonesia to send warships to monitor its movements.
Previously, China had asked Indonesia to stop drilling in the Tuna Block. However, Indonesia did not comply with this request because the Tuna Block is legally located within the Exclusive Economic Zone (EEZ) of Indonesia in the North Natuna Sea.
Response from SKK Migas and Harbour Energy
In addition, Harbour Energy previously proposed to cooperate with Zarubezhneft to achieve the 2023 Tuna Block development mission.
SKK Migas, on the other hand, is also making effort to mitigate the impact of sanctions on the Tuna Block development plan. But it didn’t work.
So far, Harbour Energy is looking for a strategic partner. The government hopes to find partners as soon as possible, because the completion of this project will generate government gross revenues of US$ 1.2 billion (Rp 18.4 trillion), and contractors’ gross revenues reaching US$ 773 million (Rp 11.4 trillion), cost recovery provisional costs amounted to US$ 3.3 billion.
With production starting in 2026, the gas produced by the Tuna Block will be exported to Vietnam, which is 15 kilometers away. Estimated gas production from the Tuna Block ranges from 100 to 150 million cubic feet per day (MMSCFD).
Previously, the development produced by Harbour Energy and Zarubezhneft would have produced more than 100 million barrels of oil equivalent (MBOE), with production reaching 40,000 to 50,000 barrels of oil equivalent per day (BOEPD). achieve 55% of production in the form of gas, and 45% in the form of liquids.
