Indonesia to Pull Out of OPEC

Indonesia to Pull Out of OPEC

JAKARTA ~ Indonesia will withdraw from the Organisation of Petroleum Exporting Countries after years of declining exports, the energy minister said on Wednesday even as other producers cash in on soaring oil prices.

The only Southeast Asian member of the cartel has become a net oil importer and will not renew its OPEC membership at the end of this year, Energy and Mineral Resources Minister Purnomo Yusgiantoro said.

“When I get back to the office … I will sign that we withdraw from OPEC,” Yusgiantoro told a group of foreign reporters at a lunch in Jakarta.

Analysts said the withdrawal should be a wake-up call to Indonesia to boost its spending on crumbling infrastructure and accused past governments of failing to manage the country’s abundant oil and gas riches.

Yusgiantoro said President Susilo Bambang Yudhoyono had told a recent budget planning meeting that he had decided to pull the country out of OPEC, which accounts for 40 percent of the world’s oil supplies.

But the minister said Indonesia, one of the smallest OPEC members, could rejoin if production increased in line with an ongoing effort to boost capacity after years of declining investment.

“If our production comes back again to a level that gives us the status of a net oil exporter then I think we can go back to OPEC,” he said.

Indonesia’s membership of OPEC will expire at the end of 2008 when its current paid membership of the organization runs out, Yusgiantoro said.

“We already paid the fee this year … the fee is about two million euros (US$3.14 million),” he said.

Indonesian officials have for years been weighing up the benefits of pulling out of OPEC, which the country joined in 1961.

While other members have enjoyed windfall profits on the back of high global oil prices, Indonesia has been unable to get enough of its 4.37 billion barrels in proven reserves to the market.

As a net oil importer Indonesia would prefer lower prices but OPEC has been reluctant to boost supply to ease pressure on markets, where oil hit an all-time high above $135 per barrel last week.

Parliament energy committee chairman Agusman Effendi said OPEC’s failure to do more to boost supply had made Indonesia’s decision to withdraw from the cartel easier.

“If OPEC had more solidarity with its members and helped those like us who are suffering from the current high prices, it would have been a different matter,” he said.

He conceded the oil giants were unlikely to listen to Jakarta’s complaints.

“Indonesia is such a small producer, its output means nothing compared to that of most of the other members. Our pullout will mean nothing,” he said.

The cost of sustaining massive fuel subsidies in the face of record oil prices forced the Indonesian government last week to hike the retail fuel price by some 30 percent.

The move has sparked widespread protests and piled pressure on the government ahead of elections next year.

Oil production in the archipelago has been in decline since 1995 with yields dropping in well-established fields, Yusgiantoro said.

The government earlier this year lowered its oil sales estimate for 2008 to 927,000 barrels a day from a previous 1.034 million barrels.

Kurtubi, an oil and gas analyst at the Center for Petroleum and Economics Studies, said the decline in Indonesia’s oil production was a result of failure by successive governments to promote investment and exploration.

“The withdrawal of Indonesia from OPEC is actually something very embarrassing. It only shows the failures of the government,” he said.

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