Before the oil boom of the early 1900s, Balikpapan was an isolated Bugis fishing village. Balikpapan's toponym is from a folk story in which a local king threw his newborn daughter into the sea to protect her from his enemies. The baby was tied beneath some planks that were discovered by a fisherman. At any other stories, Balikpapan's toponym ("balik" = "behind" and "papan" = "plank") is from an event that Kutai sultanete, Sultan Muhammad Idris, sent 1000 planks to aid the Paser Kingdom to build a new palace. The planks were shipped from Kutai to Paser through Borneo shorelines by roping all the planks together. 10 out of 1000 planks that originally shipped was drawn and resurface to a place what we currently called as Balikpapan.
On 10th February 1897, a small refinery company, Mathilda, began the first oil drilling. Building of roads, wharves, warehouses, offices, barracks, and bungalows started when the Dutch oil company Bataafsche Petroleum Maatschappij arrived in the area.
Second World War
On 24 January 1942, a Japanese invasion convoy arrived at Balikpapan and was attacked by four United States Navy destroyers that sank three Japanese transports. The Japanese army landed and after a sharp but short fight defeated the Dutch garrison. The defenders had partially destroyed the oil refinery and other facilities. After this the Japanese massacred many of the Europeans they had captured. Several campaigns, including the longest bombing run so far, followed until the 1945 Battle of Balikpapan, which concluded the Borneo campaign by which Allied Forces took control of Borneo island. Extensive wartime damage curtailed almost all oil production in the area until Royal Dutch Shell completed major repairs in 1950.
CIA air raid
In 1958 the CIA attacked Balikpapan and stopped oil exports. The US was running a CIA covert mission to undermine President Sukarno's government by supporting right-wing rebels in Indonesia. The CIA, Taiwan and the Philippines had provided the Permesta rebels in North Sulawesi with an insurgent air force, the Angkatan Udara Revolusioner . On 28 April 1958 a CIA pilot, William H. Beale, flying a B-26 Invader bomber aircraft that was painted black and showing no markings, dropped four 500lb bombs on Balikpapan. The first damaged the runway at Sultan Aji Muhammad Sulaiman Airport, the second set the British oil tanker on fire and sank her and the third bounced off the British tanker without exploding. Beale's fourth bomb set on fire and sank the Indonesian Navy Bathurst class corvette KRI Hang Tuah, killing 18 crew and wounding 28. Before attacking Hang Tuah, Beale also machine-gunned the oil pipes to Shell's wharf.
The CIA had orders to attack unarmed foreign merchant ships in order to drive foreign trade away from Indonesia and weaken its economy, with the intention of undermining Sukarno's government. The day before attacking Balikpapan, Beale had also damaged a Shell complex at Ambon, Maluku. His Balikpapan raid succeeded in persuading Shell to suspend tanker services from Balikpapan and withdraw shore-based wives and families to Singapore. However, on 18 May Indonesian naval and air forces off Ambon Island shot down an AUREV B-26 and captured its CIA pilot, Allen Pope. The US immediately withdrew support for Permesta, whose rebellion rapidly diminished thereafter.
Shell continued operating in the area until Indonesian state-owned Pertamina took it over in 1965. Lacking technology, skilled manpower, and capital to explore the petroleum region, Pertamina sublet petroleum concession contracts to multinational companies in the 1970s.
With the only oil refinery site in the region, Balikpapan emerged as a revitalized centre of petroleum production. Pertamina opened its East Borneo headquarters in the city, followed by branch offices established by other international oil companies. Hundreds of labourers from Indonesia, along with skilled expatriates who served as managers and engineers, flocked into the city.