Sat, 27 Mar 1999

Govt upbeat oil revenue will rise

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto projected on Friday the government's oil revenue would rise to more than Rp 13 trillion (US$1.4 billion) for the 1999/2000 fiscal year despite a reduction in output.

Kuntoro believed oil prices would average at least $11.50 per barrel following the Organization of Petroleum Exporting Countries (OPEC) recent decision to cut the world's oil output by 2.1 million barrels per day (bpd).

"Despite the cut in output, Indonesia will still earn more than Rp 13 trillion from oil and gas taxes even if oil prices reach only $11.50 per barrel," Kuntoro said.

Under the 1999/2000 state budget, which begins on April 1, the government's oil revenue is projected at Rp 12.443 trillion based on an oil price assumption of $10.50 per barrel and a currency exchange rate of Rp 7,500 to the dollar.

He said the price of oil on the world market would be well above the government's target of $10.50 per barrel, following agreement among OPEC members to cut output.

Indonesia agreed to reduce its oil output by 93,000 bpd to 1.187 million bpd excluding condensate during OPEC's 107th ministerial meeting on March 23 in Vienna.

OPEC and several non-OPEC oil producing countries agreed to a concerted effort to reverse the fall in oil prices which began in early 1998 amid the global recession.

OPEC members agreed to cut oil output by 1.7 million bpd to 22.976 million barrels, while non-OPEC members agreed to reduce their output by 300,000 bpd.

The cut in oil production will reduce the world's oil stock by 400 million barrels to 5.5 billion barrels by the end of 1999, equal to the oil stock at the end of 1996 and 1997.

Kuntoro said the OPEC meeting in Vienna pushed oil prices to $11.88 per barrel on March 15, up from $10.37 per barrel on March 4.

Market sentiment firmed following Russia's announcement, a non-OPEC oil producer, that it would cut its oil output to about 100,000 bpd

"Oil prices climbed to $13.22 per barrel on March 23 when the OPEC meeting was being held," Kuntoro said.

According to Reuters, crude oil futures prices briefly jumped to $16.00 per barrel in early Asian trade on Friday in technically driven trade, supported by a surge in oil product futures.

Analysts and legislators expect oil prices to increase significantly following OPEC's decision, but they caution that the expectation could be shattered if OPEC members fail to uphold their promise to reduce production.

OPEC's former secretary-general, Subroto, predicted on Thursday oil prices would rise to between $15 and $16 per barrel this year and would continue to rise to between $16 and $17 per barrel by 2000.

"Of course, the price increases can only happen if OPEC and non-OPEC countries comply with the agreement on production cuts," Subroto said.

However, Subroto believes OPEC and non-OPEC members will abide by their commitments out of a common concern over low oil prices. (jsk)