Jokowi: Freezing OPEC Members is No Problem

    President Joko Widodo believes the government's decision to temporarily freeze Indonesia's membership in the Organization of the Petroleum Exporting Countries (OPEC) will not cause problems. According to the President, the decision was taken to secure the State Revenue and Expenditure Budget (APBN).

"If you have to leave, there's no problem," said Jokowi, after opening the National Leadership Meeting of the Indonesian Chamber of Commerce and Industry, in Jakarta.

    Indonesia decided to temporarily suspend its membership in OPEC during the organization's 171st session in Vienna, Austria. The government delegation, Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan, said Indonesia left because the OPEC meeting decided to reduce crude oil production to 1.2 million barrels per day (BPD) excluding condensate. OPEC asked Indonesia to cut domestic oil production by 5 percent (equivalent to 37,000 barrels per day).

    In fact, the need for state revenue is large, and in the 2017 State Budget Plan, it is agreed that oil production in 2017 will only decrease by 5,000 barrels compared to production in 2016," said Jonan, in a written statement.

OPEC said the production cuts would take effect in January 2017. Russia, which is not an OPEC member, agreed to cut its oil output to restore slumping world oil prices. According to Jonan, for Indonesia, which has been an oil importer since 2003, the OPEC agreement is not profitable. This is because production cuts will lead to price increases.

    The President assessed that the temporary suspension of Indonesia's membership in OPEC was appropriate to protect the state budget. In addition, the suspension of membership in OPEC is not a new issue for Indonesia. We used to be members and never become members. We enter again because we want information on price fluctuations and stocks in each country," said the President.

Indonesia once left OPEC in 2008 and entered again in 2015. Coordinating Minister for the Economy Darmin Nasution believes that Indonesia's exit from OPEC will have a good impact on state revenues.

    This is because the role of Indonesia's oil production is not significant to international oil conditions. If we are outside, it's not too different," he said.

 

According to Darmin, the only advantage of being a member of OPEC is the negotiation of world oil production and prices. Member of the House of Representatives Energy Commission Kurtubi predicts the OPEC agreement is just a tactic to influence market psychology without realizing it.

    Moreover, Indonesia was only asked to cut 37 thousand barrels per day. If we don't reduce production, it won't affect prices either," he said.

    But Kurtubi supported the government's decision to temporarily freeze OPEC membership instead of leaving permanently. This is because Indonesia still needs information on industrial developments and oil prices from OPEC. He advised the government to be aware of the potential for price increases.

Koran Tempo, Page-6, Friday, Dec 2,2016