Indonesia Pursues Offshore Energy Exploration Under China’s Shadow

On January 2, Indonesia announced that it had approved plans for the development of an offshore gas field on the Indonesian continental shelf in the North Natuna Sea, located near the Indonesia and Vietnam border. Under the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), the country’s oil and gas regulator, the project is estimated to entail a US$3.07 billion investment and will be operated by the British company Harbour Energy, with the output exported mainly to Vietnam by 2026. 

This is an important project for the economic development of and bilateral relations between Indonesia and Vietnam. But since the location of the Tuna field is in the southern section of the South China Sea, Indonesia is taking some risks and must be prepared for how China responds and what it might face as a result. Because the gas exploration site lies under Indonesia's continental shelf and in its exclusive economic zone, Jakarta has the sovereign right under the United Nations Convention on the Law of the Sea (UNCLOS) to exploit all the natural resources in its water column and on the seabed and subsoil. 

Despite Indonesia’s not being among the six parties locked in the South China Sea maritime dispute, China has maintained that its nine-dash line claim overlaps with some parts of the Indonesia Exclusive Economic Zone. In response to this, Indonesia has made clear that it does not recognize China’s assertion of its territorial sovereignty, which was rejected by the 2016 arbitral ruling on a case brought by the Philippines and heard at the Permanent Court of Arbitration in the Hague. Jakarta argues that it does not have any overlapping claim with Beijing.

The South China Sea with China's nine-dash line indicated: While Indonesia is not one of the six claimants, Jakarta does not recognize Beijing's position (Credit: shubhamtiwari / Shutterstock.com)

Chinese protests against Indonesia's oil exploration are not new. Previously, Indonesia has conducted offshore oil exploration in the Tuna Block, which is also located in the overlapping area between Indonesia's EEZ and China's nine-dash line. Beijing has taken a series of actions against Indonesia's oil exploration, including formal diplomatic notes or démarches, the summoning of ambassadors to demand clarification, the dispatching of the China Coast Guard to patrol around oil rigs, and the sending of a surveying ship to the area. These moves have raised tensions between China and Indonesian maritime law enforcement. The Indonesian Coast Guard (BAKAMLA) and the Indonesian navy have on many occasions tried to escort the Chinese survey ship out of Indonesian waters.

With the approval of this new offshore exploration project, the Indonesian government appears to have calculated the risks and anticipated some escalation of tensions with China. According to Dwi Soetjipto, the head of the SKK Migas, the Indonesian Navy are ready to protect the nation’s sovereign rights. 

Indonesia has just appointed a new armed forces chief from the Navy - Admiral Yudo Margono. He has identified the South China Sea issue as one of his most important concerns, stating that securing Indonesia's sovereign rights in the North Natuna Sea is one of his priorities. To do so, Margono plans to host a special joint operation that will involve not only the Navy but also the Army to protect Indonesian activities in the North Natuna Sea, including gas exploitation.

This commitment is important and necessary for Indonesia to be able to reiterate its sovereign rights without fear of illegal intrusion by any country. As part of the strategy to protect the North Natuna Sea, Indonesia last year introduced Presidential Regulation No. 41/2022 which aims to boost governance in the contested maritime area. Under the regulation, Jakarta has set some priorities for the development of the region, including fisheries, tourism and increasing defense capacity and presence.

That said, Indonesia's plan to proceed with offshore oil and gas projects in waters that China claims is an important course of action. Not only does it enforce Indonesia's sovereign rights to explore and exploit natural resources but it also reiterates Jakarta's refusal to recognize the contentious nine-dash line. Indonesia will have to be prepared for the risks entailed in this strategy, both through the bolstering of its defense capacity and its pursuit of diplomacy.