Indonesia should downgrade OPEC status: Panel

Indonesia should downgrade OPEC status: Panel

Dow Jones, Jakarta

A high-level Indonesian panel has recommended that the country
downgrade its membership in the Organization of Petroleum
Exporting Countries (OPEC) to "observer" status, an official
document recently viewed by Dow Jones Newswires indicated.

A downgrade would reduce the financial commitments of
Indonesia, already a net importer of oil, to the group, according
to the document.

The document doesn't say if such a downgrade would affect
Indonesia's right to vote during OPEC meetings on the group's
output policy. However, the document does indicate Indonesia's
powers within OPEC would be curtailed.

It is unclear if OPEC would permit such a downgrade, which
would be unprecedented in the group's history.

According to the document, the panel, which includes high-
level officials from the Ministry of Energy and Mineral
Resources, Finance Ministry and Ministry of Foreign Affairs, is
recommending the OPEC membership status change on economic
grounds.

Such a downgrade would exempt Indonesia's cash-strapped
government from OPEC's annual membership fee of $1 million and a
yearly contribution of US$52,016 to the OPEC Fund, the document
said.

Government officials contacted by Dow Jones Newswires declined
to comment on the document, merely saying the government is still
discussing the matter.

On Indonesia's membership in OPEC, which the country joined in
1962, the panel has considered three options, the document said.

Indonesia could maintain its current status until it is
officially declared a net oil importer and disqualified as an
OPEC member by the group.

It could also withdraw from OPEC or downgrade its membership
to "observer" status.

"Taking into account (the costs and benefits), it's
recommended - if possible - to take the third option, which is to
continue as a member, but with 'observer' status, so that
(Indonesia) is exempt from the obligation to pay contributions,"
according to the document.

The panel's conclusion is the result of a directive issued by
Mines and Energy Minister Purnomo Yusgiantoro earlier this year,
who had called for an official review of Indonesia's OPEC
membership, amid pressure from legislators and industry analysts.

That pressure has stemmed from Indonesia's steadily
diminishing crude oil output due to a lack of fresh investment
and exploration as established oil fields run dry.

Foreign investors have steered clear of pumping new money into
Indonesia's energy sector due to infrastructure concerns and
perceptions of an unpredictable judiciary.

For the first time ever, Indonesia became a net crude oil
importer for several months last year as a lack of new oil
exploration over the past three to five years sent oil production
tumbling.

Indonesia's imports of petroleum products have exceeded
exports for several years and the country has been struggling to
meet its current OPEC output quota of around 1.4 million barrels
a day.

The country produced 961,200 b/d of crude oil in March,
outpacing the 942,000 b/d in February, a level that analysts say
had marked a 30-year nadir.

The panel also says a downgrade to "observer" status would
help Indonesia maintain good ties with other OPEC members which
could be extended to wider economic cooperation beyond oil,
according to the document.

Continued OPEC membership, albeit in a diminished form, would
also benefit Indonesia in terms of bilateral or multilateral
support from OPEC countries during times of heightened political
tensions at home.

The separatist insurgency in the northwestern province of Aceh
hasn't waned; neither have the ethnic and religious conflicts in
Maluku and Central Sulawesi.

Continued Indonesian membership would also help preserve OPEC
unity.

"Even with such (a reduced Indonesian) status, OPEC unity
hopefully can still be preserved, so that negative implications
for oil prices can be minimized," the document cited the panel as
saying.