OPEC agrees to raise output ceiling by 10%

JAKARTA (JP): The Organization of Petroleum Exporting Countries (OPEC) agreed yesterday to raise its output ceiling by about 10 percent to 27.5 million barrels per day (bpd) for the first half of next year, from 25.03 million pbd.

OPEC secretary-general Rilwanu Lukman said delegates at the 103rd OPEC Conference at the Dharmawangsa hotel set the new output ceiling to benefit from the growth in world oil demand, which the organization estimated to be between 1.5 million bpd and two million bpd next year.

World demand this year is estimated at 73.5 million bpd.

Under the new ceiling, Algeria had its quota increased by 21.3 percent to 908,500 bpd, while the other 10 countries uniformly received a quota increase of 9.5 percent.

The ceiling increase was first proposed by Saudi Arabia, but several countries, including Libya, Algeria, and Iran, opposed the idea until Friday.

Lukman said that after more than six hours of meetings yesterday all the delegates agreed to the ceiling increase as well as their quota allocations.

"(There were) absolutely no reservations (about the ceiling and quotas) on the part of any one of the delegations," said Lukman, who was re-elected as the secretary-general during the meeting.

OPEC groups Indonesia, Saudi Arabia, Algeria, Iraq, Kuwait, Libya, Qatar, the United Arab Emirates, Venezuela, Iran, and Nigeria. It accounts for 40 percent of the world's output.

OPEC last increased its output ceiling four years ago.

When asked about whether the ceiling increase might destabilize oil prices, Lukman said OPEC purposely raised the ceiling in order to keep prices stable amid the world' growing demand for oil.

New OPEC president I.B. Sudjana, who is also Indonesia's Minister of Mines and Energy, said the conference estimated the world's demand for OPEC oil would be more than 28 million bpd but OPEC had set a lower ceiling to keep prices stable.

Former OPEC secretary-general Subroto also believed oil prices would remain strong despite the ceiling increase since the new ceiling was similar to OPEC's actual output this year.

"Prices might go down to begin with, but they will soon recover," Subroto said.

The Ministerial Monitoring Subcommittee -- which is charged with monitoring members' compliance with their own ceiling -- reported during the conference that most members had violated their quotas, taking total OPEC output to 27.2 million bpd this year, or about 2.2 million bpd higher than its ceiling.

Lukman said all member countries stressed their commitment to the new ceiling and individual allocations, but he stressed OPEC would not impose any sanctions on quota violators.

Sudjana said he was satisfied with the results of the conference, adding that the new quota allocated for Indonesia would enable Indonesia get more revenue from oil exports.

Indonesia's quota was increased to 1.456 million bpd, from 1.33 million bpd.

The state-owned oil and gas company, Pertamina, has stated that Indonesia has enough spare capacity to increase the country's oil output to 1.5 million bpd.

Other delegates also expressed satisfaction with the results of the conference.

"We are happy. I think prices will hold up for the time being," Kuwaiti Oil Minister Issa al-Mazidi said. The country's new quota is 2.190 million bpd.

Iranian delegates also reacted positively. "The ceiling is well below the call on OPEC oil if members adhere (to quotas)," one said.

Sudjana said OPEC delegates would have a free day today and would meet President Soeharto on the closing day, tomorrow, at the hotel. (jsk)