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Indonesia to pull out of OPEC
Anthony Deutsch Associated Press Writer
Indonesia is leaving the Organization of Petroleum Exporting Countries because declining production and investment have made it difficult to meet its own needs, the energy minister said May 28.
Purnomo Yusgiantoro told reporters it no longer makes sense for Indonesia, the only Southeast Asian member of OPEC, to stay in the cartel.
“Even though we are sometimes a net importer and sometimes a net exporter, we are a consuming country,” he said. “Indonesia is pulling out of OPEC.”
Indonesia is the region’s largest oil producer, but the nation of 235 million people has had to import for years because of aging wells and disappointing exploration efforts. A weak legal system and red tape has scared foreign investors away, even as domestic oil consumption rises.
Purnomo said the decision to leave OPEC was made by the Cabinet of President Susilo Bambang Yudhoyono, which is being forced to slash fuel subsidies due to soaring global prices. In the last few days, consumers have seen prices at the pump jump around 30%.
“We are not happy with the high oil price,” he said.
Door open to rejoin The move means Indonesia will lose its vote at OPEC, a 13-member body that has used its vast production capacity to influence global oil prices during times of crisis. The government could rejoin if it is able to boost exports in the future, Purnomo said.
Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said it will save Jakarta the $3.1 million annual membership fee, but cost it some prestige on the international scene.
“I don’t see any substantive loss, other than on the prestige,” he said. “They have been an oil importer ... they really have not had much influence within the OPEC organization.”
In April, Yudhoyono said his nation needs to concentrate on increasing domestic production, which has dropped to less than 1 million barrels a day from just over 1.5 million barrels a day in the mid-1990s.
Indonesia, which heavily subsidizes oil to protect the poor, has been faced with a budget crisis with global oil prices now hovering at around $130 a barrel.
It began reducing fuel subsidies in 2000, but still spends billions of dollars to help consumers cover the costs of gasoline, diesel and kerosene, which is used by low-income families for cooking.
Purnomo said the government’s long-term policy is to eliminate subsidies altogether because they undermine market forces and encourage smuggling to other countries. He said another hike was not expected this year, however.
Mid-May’s increase triggered small but rowdy protests by students and workers, but was hailed by economists who said Yudhoyono had taken the biggest step he could without threatening economic growth.
Others argued that with the government still subsidizing 57 percent of retail transport and cooking fuels, it did not go far enough.
OPEC was formed in 1960 by founding members Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Indonesia joined in 1962.
—Associated Press writer Thomas Hogue in Bangkok contributed to this article
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