Oil industry gets price warning

Oil industry gets price warning

JAKARTA (JP): Subroto, a former secretary-general of the
Organization of Petroleum Exporting Countries (OPEC), is upbeat
that oil prices will keep improving, but warns the organization
to prevent prices from becoming too high.

"If the prices rise too high, it is feared that those who feel
unfavorably affected may exert pressure in response," he was
quoted by Antara as saying yesterday during the fifth Asia
Pacific Mining Conference and Exhibition at the Jakarta
Convention Center.

Oil prices currently reach about US$21 per barrel, and Subroto
is optimistic that it will keep increasing.

According to Subroto, the current rise in oil prices resulted
from at least two factors -- the supply-demand stability on the
world market and speculations that Iraqi oil will not enter the
market.

The global oil supply, he said, currently reaches 60 million
barrels per day (bpd), of which about 25 million bpd are supplied
by OPEC and the remainder by non-OPEC countries. The supply can
be wholly absorbed by the world market, particularly because
Europe and North America are approaching winter.

There is no fear of the world market being oversupplied, he
said, because Iraq is unlikely to export its oil this year or in
1997.

"The supply-demand stability is indeed beneficial to producers
because it will keep propping up oil prices," he said.

Because of it, Subroto said, OPEC, in its next meeting in
November, should maintain its current production quota of 24.52
million bpd, so that the group's members can benefit from the
rise in oil prices.

"Indonesia must hold on to it because in terms of production
Indonesia has reached its capacity maximum," he said. "What we
need is a price increase."

Subroto predicted there would be proposals for an increase in
the quota from such countries as Saudi Arabia and Iran. Under
current market conditions, OPEC could raise its quota to 26
million bpd.

Asia

The four-day seminar and exhibition, attended by delegations
from ASEAN countries, Canada, South Africa, Poland, the United
States, India, China, Japan, New Zealand and Australia, was
opened yesterday by Ukar Sulistiyo, an expert assistant to the
minister of mines and energy.

In his presentation in the seminar, Subroto noted that Asia
will be a new driving force in the oil industry to replace North
America and Europe, following the growth in the region's economy.

"For the first time in the history of oil, North America will
not be the centerpiece of world oil demand. By 1997, oil
consumption in Asia, including Japan, is expected to exceed that
of North America. By 2000, the total consumption of Asia,
including Japan, is expected to reach 21.63 million bpd, compared
with 14.2 million bpd in 1993," Subroto said.

Exploration activities will increase in the region, but only
China and Vietnam are projected to significantly increase their
oil production, while Indonesia and Australia are expected to see
a production decrease and output in Malaysia and Brunei will
level off, according to Subroto.

Sluggish oil production raised the dependence of the region on
oil imports from 59 percent in 1993 and is expected to rise to
between 62 percent and 64 percent in 2000 and between 68 percent
and 69 percent in 2005.

"Indonesia, at present the largest oil exporter in the region,
is expected to become a net oil importer in 2005," he said. (jsk)