05/29/2008, 00.00
INDONESIA
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Oil production down, Jakarta quits OPEC

Current production is 860,000 barrels a day - not enough even to cover domestic demand. Protests in the country over rise in oil price. The country has large reserves of natural gas, but lacks the funds necessary to develop them, and foreign companies are hesitant to invest. Methane now the centre of attention.

Jakarta (AsiaNews/Agencies) - Indonesia's energy minister, Purnomo Yusgiantoro, confirmed yesterday that his country is leaving the Organization of the Petroleum Exporting Countries (OPEC), of which it has been a member since 1962.  Indonesia, the only member of OPEC in southeast Asia, recently began to import petroleum, especially from Iran, Saudi Arabia, and Kuwait, after its production fell and no new reserves were found.

Jakarta has little money for exploration, and foreign companies are hesitant to invest in oil exploration and extraction, because of widespread corruption and the lack of legal protection.  The country's current production of 860,000 barrels per day does not cover domestic demand, which is expected to rise quickly.  Experts maintain that the decision is also a protest against OPEC's insistent refusal to increase production, despite the rapid rise in the oil price, which has reached about 135 dollars a barrel.

Nonetheless, analysts maintain that Indonesia's exit from OPEC will have no effect on the price of oil or on OPEC's policy, since it had little influence in the group.  But they say it is a strong signal of the dramatic social and economic impact that rising crude prices are having on Asian economies.

The increase has driven inflation higher in Indonesia, and the recent "cuts" in public fuel subsidies have caused a price rise of about 30%, sparking widespread public protests.  The country also has large reserves of natural gas, but it recently declined to renew its supply contracts, and consumers like Japan have decided to turn instead to Australia and other producers.

Moreover, it is estimated that Indonesia has methane reserves, near its coal deposits, of 138 trillion cubic meters, and on May 27 the country signed its first methane extraction contract, with the local companies Medco Energi and Energi Pasir Hitam. The sector is of great interest to the leading multinational energy companies, and to encourage the high level of investment necessary, Jakarta is offering companies 45% of production (the figure is "only" 15% for oil).  Nonetheless, experts estimate that it will take 20 to 30 years to develop an adequate level of production.

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