Minister expects oil prices to exceed budget forecast

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana said yesterday that Indonesian oil prices were likely to remain above US$16.50 a barrel, a level used by the government to calculate its budget for this fiscal year which ends next March.

"We hope our oil prices will remain stable. It they fall from their current levels, they may remain a little below $20 a barrel," Sudjana told reporters after meeting President Soeharto at Merdeka Palace.

Sudjana said Indonesian oil prices had slightly increased to an average of $20.75 a barrel.

"We hope the prices will stay at this level, so our budget forecasts will be secure," he said.

Based on an average crude oil price of $16.50 a barrel, the government expects Rp 14.12 trillion (US$5.9 billion) in revenue in 1996/97 from the oil and gas sector, which is a slight increase on last fiscal year's target of Rp 13.2 trillion.

The government also expects Rp 64.08 trillion in revenue from non-oil sectors and Rp 12.41 trillion from foreign aid this fiscal year.

The state-owned oil company Pertamina has said the government would receive approximately $600 million more for every one dollar increase above the oil price envisaged in the budget. But Pertamina said that 47 percent of the additional revenue would be swallowed by the cost of crude oil to feed its refineries for domestic distribution.

Effect

Sudjana said the recent price rise was a psychological effect of the conflict between Iraq and the United States. "It coincided with an undersupply situation in the U.S. oil market," he said.

The minister confirmed that Indonesia's oil production had surpassed its output ceiling of 1.3 million barrels a day as set by the Organization of Petroleum Exporting Countries (OPEC).

"I think it's quite normal, and over-production also happens in other member countries," he said.

He said that OPEC countries now produce more than their combined quota of 25.03 million barrels a day.

He clarified speculation on whether oil demand could absorb the increasing supply by saying that "producers should have anticipated strong demand on the growing tension between the United States and Iraq."

"So, I would say that it's a psychological effect of the conflict."

In yesterday's meeting Sudjana reported the results of a recent conference on solar energy to Soeharto. The conference was held in Harare, Zimbabwe.

Based on his experience in Zimbabwe, Sudjana said there was a good chance that Indonesian experts on solar energy would expand their business to African countries.

He said that to optimally utilize solar energy, the government had outlined a number of programs to be implemented by the year 2003.

The programs would focus on utilizing solar energy resources in remote areas, he said. (alo)

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