Oil revenue target safe despite prices fall: Official
Oil revenue target safe despite prices fall: Official
JAKARTA (JP): Indonesia may still be able to reap the targeted Rp 100 trillion (about US$10.52 billion) in oil and gas revenues this year, despite a drastic plunge in crude oil prices amid fears of a global recession, according to a senior government official.
Economics and finance specialist at the Ministry of Energy and Mineral Resources Kardaya Warnika said on Tuesday that even if oil prices were to average at $22 a barrel for the remainder of the year, Indonesia would still make the revenue target.
He was commenting on Monday's drop of $3.42 per barrel of Brent oil, the biggest single day's drop in ten years. The plunge stirred worries among oil producing countries of continued falling prices.
"Our oil revenue target assumes an average oil price of $25 a barrel for the entire year; thus far we've seen favorable prices of above $25 during the first half of this year," Kardaya told The Jakarta Post.
Oil prices have plunged as the market gears for a global recession that seems inevitable following the recent terrorist attacks against the United States.
Analysts fear a sharp drop in industrial demand for oil, led by a slump in the airline industry which was among the first sectors to be hit by the fallout from the terrorist attacks.
Kardaya concurred with the gloomy outlook, saying that the prospects for a repeat of last year's windfall in oil revenues had dimmed.
"There should be a higher demand for oil in the winter season, but that won't be enough to cover the loss in industrial demand," he added.
The Organization of Petroleum Exporting Countries (OPEC), he said, had already cut its demand forecast for the rest of the year by between 500,000 barrels per day (bpd) and 800,000 bpd.
Also, Indonesia's own oil production fell short by 100,000 bpd from its allocated OPEC quota, mainly due to uncertainties troubling the country's largest oil producer PT Caltex Indonesia, he said.
Caltex's Riau-based operation has run into security problems with locals and legal uncertainties as it prepares to transfer ownership of one of its oil blocks.
But Kardaya noted that the still weak rupiah could bolster Indonesia's oil revenues against further drops in oil prices.
"We've pegged oil revenue at an exchange rate of Rp 9,600 to the dollar, ... the rupiah averaged above 10,000 in the first half of the year," he explained.
Kardaya also said that OPEC would cut production to prop up oil prices if they fell below $22 for more than 10 consecutive days.
Meanwhile, AFP reported oil prices in London had climbed, recouping part of a heavy fall in the previous session, as oil ministers from OPEC members indicated they had not ruled out an output cut to buttress prices.
The price of a barrel of November-dated Brent North Sea crude climbed by U.S. 43 cents a barrel to $22.45.
New York light sweet crude November futures had tumbled 3.96 cents a barrel on Monday, while Brent prices slumped 3.42 dollars.
The fall was fueled by concerns about a slump in demand for crude. Such concerns have now overtaken worries that U.S. retaliation could hit Arab oil-producers.
The slump has created a major headache for the OPEC oil ministers arriving in Vienna for a scheduled conference overshadowed by the slide in prices.
Analysts say that political constraints might prevent OPEC from cutting output after the Sept. 11 attacks on the United States.
But OPEC's president, Algerian oil chief Chakib Khelil, said on Monday that the organization had not ruled out an output cut.
"We want a $25 stable price," he said as he arrived in Vienna late on Monday.
Asked if OPEC might vote through a cut in output at the meeting, Khelil said merely: "We have a mechanism, so we just apply the mechanism."
If applied, the price mechanism provides for an output cut of 500,000 barrels per day (bpd) if oil prices persist below $22 a barrel for 10 consecutive trading days.
The OPEC basket of seven crudes worldwide has slumped to 20.51 dollars per barrel, the organization's secretariat said in Vienna on Tuesday.
OPEC has thrice cut output this year by a total of 3.5 million bpd to defend its target price of $25.
The Kuwait oil minister, Adel Khaled al-Sebeih, had hinted on Monday in Vienna that OPEC might be willing to tolerate some weakening of prices, saying he was "comfortable" with a price range of $22-25 per barrel.
A trader at the London Petroleum Exchange, Paul Goodhew, said that the pressure was on OPEC not to cut because to do so would harm the global economy.
"The U.S. would not be very happy if they cut production," he told AFP. (bkm)