Oil prices likely to rise to $18 a barrel next year

Oil prices likely to rise to $18 a barrel next year

JAKARTA (JP): Oil expert Subroto predicted yesterday that oil
prices on the world market are likely to increase to US$18 a
barrel, provided that Iraq does not enter the market.

Speaking at a seminar here, Subroto, a former secretary
general and president of the Organization of Petroleum Exporting
Countries (OPEC), explained that the price increase is projected
from the improvement in the world economy which increases the
demand for oil.

The OPEC secretariat estimates that the world oil demand in
the first quarter of next year will increase by 1.2 percent to
67.7 million barrels per day (bpd) from the same period this
year.

In the second quarter, the demand will likely rise by 1.4
percent to 65.2 million bpd.

Meanwhile, demand for OPEC oil may reach 26.13 million bpd in
the first quarter of next year, 23.91 million bpd in the second
quarter, 24.5 million bpd in the third quarter and 26.7 million
bpd in the last quarter.

In its 97th ministerial conference in Bali earlier this week,
OPEC agreed to extend its output ceiling of 24.52 million bpd
until the end of 1995. The implementation of the rollover will be
reviewed in the middle of next year.

"How OPEC members comply with their output ceilings will also
influence next year's oil prices," Subroto said. "OPEC is not an
oil cartel and it cannot punish its members when they violate
their respective output ceilings."

On Nov. 11, OPEC oil prices stood at an average of $16.71 a
barrel, while the price of the North Sea Brent was $17.15.
According to Reuters, international crude oil prices were largely
unchanged yesterday, when Brent for January was trading at
$17.04.

Iraq

Subroto, who is also a former Indonesian minister of mines and
energy, noted that Iraq, still under a United Nations (UN) trade
embargo, is a key factor in the development of next year's oil
prices because its reentry would automatically bring down the
prices.

"If Iraq enters the market next year, it will again drag down
OPEC oil prices to the worse scenario of $14 a barrel," Subroto
said.

He predicted that once the UN lifts the trade embargo on Iraq,
it will pump up to one million bpd of oil, far above the ceiling
given by OPEC of 400,000 bpd. Iraq wanted the resumption of its
3.14 million bpd quota before the Gulf War in 1990.

Even if Iraq enters the market next year, Subroto said, the
prices are likely to remain stable as long as its output does not
exceed one million bpd.

Meanwhile, economist Mohamad Arsjad Anwar of the University of
Indonesia said Indonesia is very concerned about the fluctuation
of oil prices in the world market because its oil and gas exports
still give substantial contribution to the country's balance of
payments.

Although the contribution of oil revenue into the country's
coffers declined to 26 percent last year from 91 percent in 1981,
its trading always gives surpluses to Indonesia, while non-oil
trading always suffers deficits.

Subroto predicted that Indonesia's crude oil output will
remain stable at 1.3 million bpd until the beginning of next
century because of new technology in pumping oil out of old
wells, called "enhanced oil recovery," which can maximize oil
recovery.

"If the primary recovery system, which yields the initial
barrels of oil, can pump up 25 percent or less of the reserves,
then enhanced recovery can pump up to 45 percent," Subroto said.

The government has projected that Indonesia, which has not
made major oil discoveries in the last few years, might become a
net oil importer by the early 2000s.

"It will happen if we do nothing. In fact, we have developed
the enhanced oil recovery system which can pump out oil more
effectively," Subroto told The Jakarta Post.

The state-run oil company Pertamina predicts that oil
production through enhanced recovery is projected to increase
from 358,600 bpd this year to 394,000 bpd next year and to
655,000 bpd by 2000.

Meanwhile, crude oil production from old fields through
primary recovery will likely steadily decline from 968,000 bpd
this year to 855,500 bpd next year, 738,000 bpd in 1996, 650,000
bpd in 1997 and 584,400 bpd in 1998.

Oil production from new fields through primary recovery is
projected to increase from 600 bpd this year to 3,600 bpd next
year and to 39,400 bpd in 1998. (rid)