Indonesia to ask OPEC to reactivate its membership

Indonesia plans to ask the Organization of Petroleum Exporting Countries to reactivate its membership when the cartel holds its regular ministerial meeting June 5 in Vienna, said Indonesian Energy Minister Sudirman Said. The southeast Asian producer withdrew from OPEC in 2009.

“There are several reasons,” Said explained in a June 4 interview with The Fuse in Vienna. “Number one is we are one of the world’s biggest buyers of oil and gas, and demand is great. It’s important to be closely connected with the market, and OPEC members are among the bigger producing countries.

“Number two, we’re also part of the International Energy Agency, which represents consuming countries,” he said. “We consume a lot. We produce a lot. It’s just a good time for Indonesia to be in both OPEC and the IEA.”

Indonesia’s crude oil production fell to an average of 913,300 b/d in 2014 from 1.04 million b/d in 2010, according to the US Energy Information Administration. Demand was about 1.7 million b/d in 2013, the latest year for which EIA lists a figure.

“We still have a large gap,” Said observed. “We only produce about 800,000 b/d, while our consumption is about 1.5 million b/d. Our demand is growing, so I don’t think we will be exporting. Still, we produce quite a lot, and it will be good to be part of both groups.”

US observers were not certain whether Indonesia’s action would have much impact on the ongoing discussions about whether to allow more domestically produced crude to be exported.

Contributing factor

“Indonesia recently reduced its production and cut back its forecast. That probably contributed to its decision to rejoin OPEC,” Margo Thorning, chief economist at the American Council for Capital Formation, told OGJ on June 4.

“When you begin to supply the world with substantial amounts of energy, you begin to develop closer ties,” she explained. “If we could become a reliable supply to Asia and Europe, it would certainly give us more standing as we talk about other issues. Trade between countries strengthens ties. Exporting our crude not only would benefit us economically, but also politically since we’re not spending as much on foreign aid.”

ACCF released a new policy paper on June 3 which concluded that more US crude exports would create more well-paying US jobs, increase investment and gross domestic product, put downward pressure on fuel prices, and strengthen US geopolitical ties.

Malcolm E. Turner, chief executive at Turner Mason & Co. in Dallas, said he doesn’t think Indonesia’s rejoining OPEC is relevant to the US crude export debate because it imports so much to meet its own demand.

“Producers want to export crude oil because they expect to get a better price for it,” he told OGJ. “It’s their job to do that. Refiners like low-price crude and are generally opposed to it because it raises feedstock costs.

“The question is whether US refiners can respond to increased domestic production,” Turner said. “That hasn’t materialized. Refiners can handle current production. They’d like to handle more, but need infrastructure to get that oil to them.”

Contact Nick Snow at nicks@pennwell.com.

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