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A net oil importer,

Indonesia has different interests from OPEC, analysts say.

By Polya Lesova, MarketWatch

Last update: 4:12 p.m. EDT May 6, 2008Print E-mail RSS Disable Live Quotes
NEW YORK (MarketWatch)

-- Indonesia,
a net oil importer,
is considering whether to leave the Organization of Petroleum Exporting Countries, according to media reports Tuesday.

Indonesian President Susilo Bambang Yudhoyono said Tuesday that his cabinet has been mulling whether "we should continue to stay with OPEC or withdraw our membership temporarily while increasing our [crude oil] output so that we deserve to be an OPEC member,"

Dow Jones Newswires reported.
Any decision by Indonesia to leave OPEC would be effective from the beginning of 2009, Indonesia's OPEC Governor Maizar Rahman told Dow Jones.

The only Southeast Asian OPEC member, Indonesia joined the 13-nation oil cartel in 1962.

Its oil production has fallen in recent years, because of lack of investment and exploration as well as declining output at its biggest, mature oil fields.

Indonesia had 4.3 billion barrels of proven oil reserves as of January 2007, according to Oil & Gas Journal.

"OPEC's primary activity is restraining production," said John Kingston, director of oil at Platts.

"It makes no sense for Indonesia to stay in OPEC,"

Kingston said. "Their interests are no longer in holding up the price. Why should they keep paying dues to OPEC?"
"It makes no sense for Indonesia to stay in OPEC. Their interests are no longer in holding up the price."

John Kingston, Platts

Ecuador, for example, suspended its OPEC membership from 1992 to October 2007, partly because of high membership fees.

Indonesia became a slight net oil importer in 2004.

Its total oil production has declined by 32% since 1996, according to the U.S. Energy Information Administration (EIA).

In 2006, Indonesian oil production averaged 1.1 million barrels per day, of which 81%, or 894,000 barrels a day, was crude oil.

Indonesia's current OPEC crude oil output quota is set at 1.45 million barrels a day, well above the country's production capacity, according to the EIA.

"This decision has been some time in coming," said Rachel Ziemba, an analyst at RGE Monitor.

Indonesia's "interests have changed," Ziemba said. "It, like other oil importers, has to pay for $120 a barrel oil. That and the decision to subsidize oil and oil products have put great pressure on its fiscal policy."

If Indonesia leaves the oil cartel, "it's not going to change the ability of OPEC to move energy markets," Ziemba said.

On the New York Mercantile Exchange Tuesday, crude futures reached a fresh record above $122 a barrel as weakness in the U.S. dollar and global supply concerns fueled gains in oil prices for a third trading session.

See Futures Movers.

With oil hitting record highs, the Indonesian government has announced plans to raise fuel prices, which are heavily subsidized, to ease pressure on the budget.

The government last raised fuel prices in March and October 2005.
Indonesia's fuel and energy subsidy spending is expected to top $20 billion, or one-fifth of total government spending, pushing the budget deficit above 2% of GDP, according to data from Cazenove Group. Read more.

Polya Lesova is a MarketWatch reporter based in New York.

  • " ..... should Indonesia stay in the OPEC or leave .... "

  • 'Ahu kura ahia, mansia nia'

    User icon of JohanN
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    Anis, what do you think?

    Begin de details te vergeten

    User icon of AnisJ
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    On 14-05-2008 19:31 JohanN wrote:
    Anis, what do you think?

  • " ..... I am the topic master ..... Emoticon: Yes! Emoticon: Yes! ..... what do you think ... ??"

  • 'Ahu kura ahia, mansia nia'

    User icon of Jeroen
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    You are the topic master, Johan asked you something you should already have included in your frist post, I am the forum master and will lock this topic because it is a simple news dump.

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