Indonesia nears goal of rejoining OPEC

Indonesia is close to rejoining OPEC despite a continuing decline in crude output in Southeast Asia’s largest economy.

The country hopes to be readmitted to the oil producers’ cartel at the December meeting of  OPECnations, seven years after Jakarta suspended its membership amid falling production.

In a statement on Tuesday, Opec said Jakarta had submitted an official request to reactivate its membership, which had been circulated to cartel members for approval.

Following feedback, Sudirman Said, Indonesian energy minister, would be invited to Opec’s December meeting, it said. “This will include the formalities of reactivating Indonesia’s membership of the organisation. . . Indonesia has contributed much to Opec’s history. We welcome its return,” the statement added.

Although the country exports some crude, it remains a net importer because of its need for refined products.

Industry analysts say re-entering the cartel has clear benefits for Indonesia, where a fast-growing population is driving demand for oil and the government is pushing ahead with plans to expand the refining industry.

“Oil production is declining rapidly here,” said a Jakarta-based consultant in the oil and gas sector. “To have good contacts, which membership of Opec would give them, would help them in procuring or negotiating competitive deals.”

But Opec’s decision to allow Indonesia back in was “perplexing”, giving a significant buyer of crude oil a window into discussions on production and pricing, said Suresh Sivanandam, an analyst at Wood Mackenzie.

Once Indonesia rejoins, it will be among the smallest producers in the group, alongside Libya, Ecuador and Qatar, and will bring Opec’s membership to 13 countries. Indonesia has a 2015 oil output target of about 825,000 barrels a day, roughly half its peak production in the early 1990s.

Despite its declining production the country when approved will add to Opec’s already growing output levels.

“We have sent a letter to the organisation to reactivate our membership. They’re all agreed and it will be officially reactivated in the next Opec meeting,” said Widhyawan Prawiraatmadja, head of the performance management unit at Indonesia’s energy ministry. Membership would help Jakarta build relations with large exporters, he said: “It gives us a lot of benefit.”

The Indonesian delegation attended Opec’s June meeting, where officials called for the country’s readmission to the cartel.