WSJ: Fate of Gas Field Is Test for Indonesia’s New Leader

The fate of Indonesia’s largest gas field is providing a stern test of the country’s openness to foreign investment under new President Joko Widodo, while threatening billions of dollars of potential spending by major oil companies from France and Japan on its struggling resources sector.

Mr. Widodo’s administration last month said it would turn over the giant Mahakam field off the east coast of Borneo to state-owned Pertamina, when the government’s contract with France’s Total SA and Japan’s Inpex Corp.—who currently have equal stakes in the project—expires at the end of 2017.

The government is now seeking a compromise that could see both foreign companies, who have jointly run Mahakam for more than 40 years, investing over $30 billion, retain a stake in the field.

But the decision to transfer control has already sparked concern that production from Mahakam, which accounts for a quarter of Indonesia’s gas output and almost 10% of its oil flows, will stall as operations are transferred to Pertamina. The company is profitable, but carries heavy debt, is stretched thin with other projects and is seen lacking Total’s operational capacity in a complex field. MORE