The rising cost of Indonesia’s resource nationalism

JAKARTA – Well before Covid-19 torpedoed growth, exports and investment, it was already dawning on Indonesians that resource nationalism policies are coming at a high and rising cost to the country, both in capital expenditure and lost revenues.

President Joko Widodo’s government’s impending move to assume control of Sumatra’s Rokan Block, previously the country’s largest producing oilfield, was panned in a recent Tempo magazine editorial as a “misguided takeover” that it claimed will result in significant losses for at least the next three years and perhaps even longer depending on when global oil markets return to normality.

Located onshore in the southern Sumatran province of Riau, Rokan will pass from Chevron Pacific Indonesia (CPI) to the state-owned Pertamina oil company when the US firm’s contract expires next year, part of a national strategy to take ownership of many of Indonesia’s oil and gas assets.

Oil industry experts fear, however, that Rokan may follow the same pattern as the offshore Mahakam gas block in East Kalimantan where production has yet to recover since the French oil company Total was forced to relinquish its controlling stake to Pertamina in early 2018.