IPXHY Inpex Corp (PK)

JAKARTA, Indonesia—Japan's Inpex Corp. plans to cut about half of its workforce in Indonesia due to Jakarta's monthslong delay in approving or assessing its $15 billion proposal for a deep-water gas project, Indonesia's upstream oil-and-gas regulator said Wednesday.

Even if the project is eventually approved, the energy firm now expects a delay in making a final investment decision on the project of at least two years, the regulator said.

The regulator, SKKMigas, said in a news release that it had been informed by Inpex of the downsizing plan following the delays to a government decision over whether to approve the project. It said Inpex has between 350 and 400 employees in Indonesia.

In the release it indicated 60% of personnel could be cut, but SKKMigas Chairman Amien Sunaryadi later pegged the number at 40% speaking with reporters.

Inpex and its partner in the project, Royal Dutch Shell PLC, last year proposed exploiting one of Indonesia's largest known deep-water gas fields, known as Masela, by using a floating liquefied natural gas unit, but some government officials in Jakarta have argued for the use of pipelines and an onshore facility instead to help develop the country's remote east.

Neither representatives for Inpex nor Shell immediately responded to requests for comment.

Inpex has said the onshore option, which would require connecting pipelines to islands up to about 370 miles away, would be far more expensive than its offshore plan.

According to the regulator, Inpex said that even if the government of President Joko Widodo were to approve the offshore plan now, there would still be about a two-year delay in making a final investment decision on the project, pushing that possibility back to 2020.

Mr. Widodo said in recent weeks that he hoped to make a decision on the project soon. Representatives for Mr. Widodo didn't immediately respond to requests for comment.

SKKMigas also said Shell is advising its engineers associated with the Masela project in Jakarta, Kuala Lumpur and the Netherlands to begin seeking internal employment elsewhere.

Gas-and-oil exploration has fallen in Southeast Asia's largest economy amid a slowdown in decision-making, investment uncertainty and lower global oil prices.

Indonesia was the world's largest exporter of liquefied natural gas until 2006, but domestic demand in the world's fourth-most-populous nation has been rising steadily.

The delay "is being seen by many in the industry as a form of sovereign risk… and with the president apparently unable or unwilling to quickly resolve the dispute," said Bill Sullivan, a legal adviser to foreign companies in Indonesia. "This suggests to many foreign investors a problem of dysfunction in the current cabinet, which does not bode well for coherent government decisions and policy making on important issues."

Anita Rachman contributed to this article.

Write to Ben Otto at ben.otto@wsj.com

(END) Dow Jones Newswires

March 16, 2016 14:25 ET (18:25 GMT)

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