Government seeks way to return to OPEC

After seven years of suspended membership, the government is floating the idea of rejoining the Organization of Petroleum Exporting Countries (OPEC) in an effort to get access to crude supplies.

Energy and Mineral Resources Minister Sudirman Said expressed on Thursday the government’s intention of becoming active again in OPEC as an observer.

“We’re considering returning as an observer so that we will be able to interact with the market. We will be one of the largest buyers and we cannot stay too far away from the sellers,” Sudirman said.

He added that the return to OPEC, and therefore securing direct supplies from its member countries, would help the country close down opportunities for rent seekers looking to exploit any advantage in the crude oil and petroleum products market.

Indonesia used to be the only OPEC member in Southeast Asia. The country became a member in 1962 and officially suspended its membership of the group in 2009 following declining domestic production that forced the country to import crude oil and petroleum products.

Indonesia currently produces around 800,000 barrel of oil per day (bopd).

However, the country needs more than 1 million bopd to meet domestic demand, according to figures from Pertamina’s Integrated Supply Chain, which is in charge of the national procurement of crude and petroleum products.

Apart from its status as an importing country, OPEC’s membership costs were also a consideration behind Indonesia’s withdrawal.

Membership of OPEC is set at a hefty ¤2 million (US$3.1 million) per year, there is no charge for observer status.

The former Indonesian governor for OPEC Maizar Rahman said that Indonesia remained a full member that had “frozen” its membership and therefore could re-join the group at any time.

Maizar has welcomed the government’s plan to return to OPEC although the country’s status would only be as an observer.

“In OPEC meetings, the energy and mineral resources minister will be able to meet various ministers of OPEC member countries. So it will be more efficient rather than making visits to each country,” he said.

Observer nations are able to attend certain meetings held by OPEC.

Maizar added that the government would also find it easier to invite OPEC countries to invest in Indonesia in the oil and gas sector.

“However, there will also be disadvantages in this [observer status] because we won’t be able to obtain facilities from OPEC’s activities, such as research regarding the energy sector and oil market,”

he said.

Amid declining production combined with rising demand for fuel, the government is now planning to establish four new refineries and revamp another four facilities in an effort to reduce the volume of imported fuel products.

However, the new refineries will consequently increase the country’s need for crude supplies, which cannot be fulfilled by output from depleted domestic fields.