Indonesia withdraws from OPEC

Indonesia, the only OPEC member in Southeast Asia, will pull out of the group after aging fields and declining production force the region's biggest economy to boost imports as crude oil prices reached records.

Energy Minister Purnomo Yusgiantoro signed a decree yesterday to exit the Organization of Petroleum Exporting Countries. The nation, a member since 1962, has been considering leaving the body in the past three years.

Indonesia imports about a third of its oil because of inadequate refining capacity and faces falling output as disputes with Exxon Mobil Corp delayed field developments and deterred investments. The country's oil output has slumped 49 percent from a peak in 1977 while subsidies to cap domestic diesel and gasoline prices may exceed $13 billion this year.

"There is an opportunity lost," said Fauzi Ichsan, chief economist at Standard Chartered Plc in Jakarta. "Still, Indonesia is now a gas country" and the government needs to encourage more investment in the gas, coal and mining industries.

The withdrawal from OPEC will help the nation save 2 million euros on membership fees a year, according to Purnomo.

OPEC members account for more than 40 percent of the world's oil supply, with output for the 12 members with quota falling 1 percent to 29.74 million barrels a day in April from a month earlier, according to Bloomberg estimates.

Indonesia's exit follows the addition of two members. Angola became an OPEC member in January 2007 and Ecuador rejoined the organization in December after a 15-year absence, swelling OPEC's ranks to 13.

Crude oil has doubled in the past year to reach a record $135.09 a barrel in New York on May 22 as demand growth outstrips supplies and the dollar weakens, prompting investors to buy commodities as an inflation hedge. OPEC Secretary General Abdalla el-Badri had no immediate comment.

Indonesia's daily crude output has fallen below 1 million barrels since February 2004, according to Bloomberg estimates. Production probably fell 0.9 percent to 859,853 barrels a day in April from March, oil and gas regulator BPMigas said on April 29.

"If production comes back to give us the status of net oil exporter then we can go back to OPEC," Purnomo said yesterday.

Fuel-price increase

Indonesia produced an average 883,000 barrels of crude oil a day in 2006, while its consumption of refined oil products that year was 1.061 million barrels a day, according to the latest edition of OPEC's Annual Statistical Bulletin.

The country's oil production peaked in 1977, at 1.686 million barrels a day, according to OPEC.

Indonesia raised fuel prices by almost 30 percent this month to reduce the government's subsidy burden of capping pump prices. Without the increase the government may have to spend 190 trillion rupiah ($20 billion) this year, more than the 126.8 trillion rupiah it had budgeted for 2008, before next year's general election.

Agencies

(China Daily 05/29/2008 page16)