Indonesia Suspends OPEC Membership to Avoid Production Cut
Jakarta. Indonesia has announced the temporary suspension of its membership within the Organization of Petroleum Exporter Countries, or OPEC, just 10 months after rejoining the body, citing an inability to comply with the cartel's decision to cut oil production by 1.2 million barrels a day, a minister said in a statement issued late Wednesday (30/11).
The organization requested Indonesia cut its production by 37,000 barrels a day, more than seven times the cut the country is willing to make without risking a widening of the 2017 state budget deficit.
"This temporary suspension is the best decision for OPEC. It will allow the decision to cut 1.2 million barrel a day to be carried out, and on the other hand Indonesia would not have to comply with the decision, in line with Indonesia's national interests," Energy and Mineral Resources Minister Ignasius Jonan said in the statement.
The country has a production target of 815,000 barrels a day in 2017, down 0.6 percent from 820,000 bpd in 2016. A 10,000 bpd cut could increase the country's budget deficit by up to Rp 2.2 trillion ($162 million), government data showed.
Still, Indonesia could enjoy a windfall from oil price increase next year, Jonan said.
An estimation from investment bank Goldman Sachs suggests an OPEC production cut would push global oil prices above $50 a barrel next year, or 11 percent higher than the $45 a barrel assumed by Indonesia in its state budget.
Indonesia first suspended its membership in OPEC in 2009 after the country became a net importer of oil as dwindling exploration investment undermining the country's oil production. At its peak, Indonesia was capable of producing 1.7 million bpd, more than twice of its current capacity.
It rejoined in January with the hopes of influencing global oil policy.
Tags: Keywords: