Indonesia says $22-$25 oil price range reasonable

Indonesia says $22-$25 oil price range reasonable

Jerry Norton, Reuters, Jakarta

Indonesia's Mines and Energy Minister said on Friday that OPEC's US$22-$25 oil price range target for 2002 was reasonable even though current price strength did not necessarily reflect supply and demand fundamentals.

Purnomo Yusgiantoro also said Indonesia still hoped it would average $22 per barrel for its crude oil in 2002 despite an average of $19 in the first two months of the year.

He was speaking to a group of foreign reporters just before leaving this weekend on a trip with President Megawati Soekarnoputri to China, the two Koreas and India, with expanding Indonesia's energy business in those countries a key topic.

While it was "good news that oil prices are at a good level" that was "not because of fundamentals...but more on what happened in the Middle East" and the psychological impact of such geopolitical developments, Purnomo said.

The United States has been seeking to build support in the region for possible tougher actions against Iraq, part of what President George W. Bush calls the "Axis of Evil", and Israeli- Palestinian tension is at a high.

But current events are "not the end of the story," Purnomo said. "The game is not over. We are finalizing first quarter and we still have the second, third and fourth quarter. Hopefully, we will have improvements in oil prices in the future."

OPEC's crude oil basket price slipped to $22.98 a barrel on Wednesday from Tuesday's $23.22, but other benchmarks have been between $25 and $26 this week.

"I think if you say the range of $22-$25 a barrel that will be the reasonable price level for overall this year," Purnomo said.

Indonesia's own $22 target price is part of the country's budget and many key projections about the economy and revenue are based on it.

Purnomo said Indonesia would have an extra 300,000 barrels per day (bpd) of oil production capacity by the end of this year or early next year, against the current 1.3 million.

"We will have additional oil production from Unocal of West Seno oil field in Makassar Strait, from Exxon Mobil in Central Java, from Conoco in Natuna as well as Pertamina in South Sumatra," he said.

While his ministry is doing its best to deal with recognized problems related to overlapping regulations, security and the layers of bureaucracy created by regional autonomy, Indonesia continues to keep and attract energy investment because it still has vast untapped production potential, Purnomo said.

He added that while it was the nature of business to always want more in the way of concessions, Indonesia was "open for any discussion of what kind of incentives (energy and mining investors and companies) may need."

Indonesia will be seeking to do some energy business of its own when Megawati -- accompanied by Purnomo among other ministers -- visits China, the two Koreas and India over a two-week period starting this Sunday.

In China, Purnomo said he hoped for discussions on the Tangguh project. Tangguh in Indonesia's Papua province is on a shortlist of three for a liquefied natural gas (LNG) supply deal for China's first LNG terminal in its southern province of Guangdong.

And for its part Indonesia -- which is trying to build up its flagging electricity generating sector -- is interested in China's "very competitive" medium-scale power plants, he said.

LNG will also figure prominently in South Korea, the world's second-largest LNG importer after Japan.