Exxon said fiscal terms meant the development would make the development uneconomic, although it has offered to play a role in providing technology and technical assistance to support the development in some way.
Discovered in the 1970s, the East Natuna Block is on the southern edge of the South China Sea and holds an estimated 46 trillion cubic feet of recoverable gas, although the reservoir also contains around 70% carbon dioxide, which increases processing headaches and reduces the amount of useable fuel.
The development will likely require geosequestration to allow Indonesia to meet its Paris Agreement commitments.
Pertamina had earlier said it expected to sign a production sharing contract with ExxonMobil and Thailand's PTTEP for the project last year, but the Exxon has a complete technology and market review meant the block did not meet hurdles for development.
Indonesia's government has indicated it wants to keep Exxon in the project, and may offer a special incentive to make it economically viable.
In the past, Pertamina's official has said that developing the East Natuna project could cost up to $40 billion to develop.
Malaysia's Petronas and France's Total were previously involved with the East Natuna project, but have both pulled out.
The stalling of East Natuna comes as Indonesia's government has asked for more domestic market obligation from gas producers to meet increasing demand, in order to reduce the nation's gas imports.