Indonesia makes official its exit from OPEC

OPEC announced that Indonesian government, concerned over the high price for its increasing imports of crude oil, has officially left the group.

Sep 12th, 2008

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 12 -- The Organization of Petroleum Producing and Exporting Countries announced that Indonesian government, concerned over the high price for its increasing imports of crude oil, has officially left the group.

In a statement, OPEC said it "regretfully accepted the wish of Indonesia to suspend its full membership" and recorded its hope that the country would "rejoin the organization in the future."

According to Subroto, the former Indonesian oil minister and OPEC secretary general, the decision to leave rested with Jakarta and not with the organization.

"OPEC did not think to oust Indonesia from OPEC even though it is a net oil importer. There is no such thing in OPEC's statutes," Subroto told the Reuters news agency in an interview.

"OPEC wants a high oil price, while Indonesia wants a lower price," Subroto said. "That is the reason for Indonesia's withdrawal."

That view was underscored by Airlangga Hartanto, a leading member of Indonesia's House of Representatives.

"In its position as a net oil importer, Indonesia can no longer gain anything from OPEC. So, it is better to leave the organization," said Hartanto, who noted that Indonesia paid two million euros a year in membership fees.

Indonesia was an oil producer for more than a century, and joined OPEC in 1961. But domestic demand, declining reserves, and an allegedly poor record of investment in the industry have all helped to turn the Asian nation into a net importer of oil in recent years.

Rising imports paid at increasingly high market rates coincided with heavily subsidized domestic fuel prices to create substantial financial pressures on the Indonesian treasury.

However, that financial squeeze on a fellow member did not move other OPEC members to boost production or otherwise lower prices—a perceived indifference that led to Indonesia's decision to leave.

Indonesia's Energy and Mineral Resources Minister Purnomo Yusgiantoro said his country could rejoin OPEC if its output rose in line with a continuing effort to boost capacity.

But the prospects of increasing production at any time on the near future are remote, with international and domestic oil companies alike earlier this week predicting a decline in their output for the coming year (OGJ Online, Sept. 9, 2008).

Contact Eric Watkins at hippalus@yahoo.com.

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