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)