JAKARTA, 9 February 2005 — Indonesia, the only Asian member in OPEC, may pull out of the oil organization as dwindling production is pushing it closer to becoming a net importer, a minister said in remarks published yesterday. Analysts warned, however, such a move could backfire and cause foreign investment in the beleaguered sector to dry up even more just as the country is looking to boost interest.
“We are studying whether we are already a net oil importer and thus no longer eligible to be an OPEC member,” Energy Minister Purnomo Yusgiantoro was quoted as saying by the Jakarta Post.
Any move to end Indonesia’s 43-year membership would have to be carefully weighed as it “involves our diplomatic ties with other OPEC members, especially the Gulf countries,” he said, adding that a panel was looking at the issue.
“The team will forward the results of the study to the Cabinet as any plan for our withdrawal from OPEC will be a diplomatic issue,” said Yusgiantoro, who last year headed the oil producers’ group.
Indonesia joined the 11-nation Organization of Petroleum Exporting Countries, which supplies nearly a third of global crude oil, in 1962 but the country’s oil output has fallen five percent annually over the last decade to less than a million barrels per day (bpd).
Its crude oil exports dropped sharply to 30,000 bpd in 2004 from 100,000 bpd in 2003, forcing Indonesia to become a net oil importer for four months of last year, said the ministry’s oil and gas director general Iin Arifin Takhyan.
Economic Minister Aburizal Bakrie urged industries to switch to gas and coal for their energy needs to save the country’s oil resources for export.
“Our industry policy going forward is that new industries must use gas and coal, while those that are currently using oil should gradually reduce it,” he told reporters here yesterday. “By using more gas and coal, oil fuel usage will decline so we can still export crude oil.”
Analysts say the stakes are high for Indonesia if it exits OPEC. Kurtubi, an oil and gas analyst from the Center for Petroleum and Energy Economic Studies, said Indonesia risked losing valuable foreign investment in the sector as it would no longer be viewed as having oil potential.
“If Indonesia leaves OPEC, it will affect the flow of oil and gas investment into the country,” he warned.
Indonesia would also lose access to an organization whose decisions influence oil supply and prices, he said. Kurtubi said Indonesia should focus instead on ways to boost output to meet domestic demand growth of up to seven percent a year, fueled in part by fixed prices and heavy fuel subsidies.
“The decline is due mainly to the natural decline in production of ageing oil fields, a lack of new investment in deep-sea exploration and regulatory problems that need to be quickly addressed,” he said.
He said there was too much red tape in current oil and gas laws, making investors reluctant to commit large amounts of capital for the long-term.
Accordingly, he urged the government to ease regulations and reduce or simplify the web of taxes and levies hampering exploration spending. “If the government does not react to this, we will only see our crude oil output plunge further and this is certainly not good news for the nation,” he said.
Industry sources told AFP that total investment in Indonesia’s oil and gas sector was expected to have hit its highest level in eight years in 2004 at $7.5 billion, up 41 percent from $5.31 billion in 2003.
Other analysts said Indonesia’s withdrawal was unlikely to shake OPEC as its six Middle Eastern members, including Saudi Arabia, control 63 percent of the world’s oil reserves. OPEC’s members are Saudi Arabia, Iran, Venezuela, Iraq, United Arab Emirates, Kuwait, Nigeria, Libya, Indonesia, Algeria and Qatar.
