Business | Oil & Gas
Indonesia breaks ranks with Opec by not cutting output
Indonesia, Opec's second-smallest producer, yesterday publicly broke ranks with its peers who are cutting output, saying it should be spared from the group's first supply curbs since 2004 because of its falling production.
- Reuters
- Published: 00:00 October 31, 2006
Jakarta: Indonesia, Opec's second-smallest producer, yesterday publicly broke ranks with its peers who are cutting output, saying it should be spared from the group's first supply curbs since 2004 because of its falling production.
While few had expected Indonesia to make any significant cuts in output as a result of Opec's deal to reduce supplies by 1.2 million barrels per day (bpd), the public refusal to do so may stoke anxieties about wider compliance among other producers.
"Our production was already low. Why should we cut it? I think other Opec members will understand about Indonesia's situation," the country's Opec governor Maizar Rahman told reporters.
Indonesia was due to cut 39,000 bpd of production after the Opec decision, Rahman said. That amounts to less than five per cent of production, now running at just below 900,000 bpd. Its output ceiling under Opec's defunct quota system is 1.45 million bpd.
Saudi Arabia and the UAE have both informed refiners of output cuts beginning next month, but oil traders are anxious to see more evidence amid fears that still relatively high prices of over $60 a barrel will mean many members keep pumping.
But the cuts put Indonesia in a delicate position, as it sometimes imports more crude than it exports and is forced to buy about a third of its national fuel supplies, which means higher oil prices do it more harm than good.
Indonesia has struggled to maintain output as the country has failed to tap new oilfields fast enough, with its crude oil production dropping to a succession of more than three-decade lows before rising slightly last month to 862,900 bpd.
Indonesia was a net importer of crude oil in July, June and May this year after production continued to fall, an energy ministry official had said.
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