ExxonMobil pulls out of East Natuna field development

July 19, 2017
ExxonMobil Corp. has decided to walk away from development of the East Natuna natural gas permit in Indonesia saying it no longer wishes to continue discussions or activity in the block.

ExxonMobil Corp. has decided to walk away from development of the East Natuna natural gas permit in Indonesia saying it no longer wishes to continue discussions or activity in the block.

The major’s decision comes in the wake of a comprehensive technology and marketing review that concluded the block is uneconomical for the company under the current terms. Despite the withdrawal, ExxonMobil is reported to have offered to help with technology and technical assistance for the development project if needed.

East Natuna, first discovered by Italian company Agip in 1973, holds an estimated 46 tcf of recoverable gas in a Miocene reservoir and is one of the world’s largest untapped gas fields.

However, ongoing difficulties for development include remoteness of the block, which lies in the Greater Sarawak basin 225 km northeast of the Natuna Islands off Borneo and 1,100 km north of Jakarta, as well as the fact that the gas has a carbon dioxide content of 70%.

There have also been a series of contract disputes over the years. Indonesian state company Pertamina and ExxonMobil first formed a partnership at the field in 1980. Several agreements were signed and then terminated during the early 2000s including a deal between Pertamina, ExxonMobil, French company Total SA, and Malaysian state firm Petronas in 2011. Petronas and Total have subsequently pulled out of the field and Thai company PTTEP joined Pertamina and ExxonMobil hoping to sign a production-sharing contract in 2016. This was not consummated either.

Development costs for the field, which lies in 145 m of water, are estimated to be as much as $40 billion.

Pertamina and the Indonesian government are still keen to develop East Natuna and the government is reported to be considering a special incentive to improve the economics and bring ExxonMobil back to the negotiating table.