Indonesia considers quitting OPEC

Desy Nurhayati ,  The Jakarta Post ,  Jakarta   |  Wed, 05/07/2008 12:54 AM  |  Headlines

Indonesia is considering temporarily quitting the Organization of the Petroleum Exporting Countries (OPEC) amid a steady decline in the country's oil production, the President said Tuesday.

Indonesia is the only OPEC member that is a net oil importer, as aging wells and lack of investment in new exploration has hurt production.

"During a Cabinet meeting yesterday (Monday), we discussed whether we would stay in OPEC or leave as we struggle to boost our oil production to reach a level where we deserve to be a member of the organization," President Susilo Bambang Yudhoyono said in opening remarks at a national meeting for development planning.

"Our oil production is currently below 1 million barrels per day because of aging wells. We need about two or three years to increase production."

Indonesia joined OPEC in 1962 as the group's only Southeast Asian member. Its daily oil production currently stands at around 927,000 barrels, down from 950,000 barrels per day last year.

Calls for the government to withdraw from OPEC have been on the rise the past few years, not only because of the slide in oil output but also because of the financial costs of membership.

As a net importer, Indonesia is missing an opportunity to reap the benefits of the persistent surge in global oil prices, which are now hovering around US$120 per barrel.

Instead, the government has had to allocate massive spending for fuel and electricity subsidies. For the fuel subsidy alone the government set aside Rp 126.8 trillion, more than 12 percent of this year's total spending.

After the Cabinet meeting Monday, the government announced plans to raise fuel prices to a rate that would be "affordable" to the majority of the public, but had yet to disclose an exact price or date.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said the government would continue studying options to leave OPEC.

"We only had preliminary talks on this matter during Monday's meeting, so we will further analyze the consequences."

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