President calls for higher oil output

President calls for higher oil output

Indonesia's president on Sunday called for greater domestic oil and gas production to help the country battle the impact of soaring global crude oil prices that are threatening its economic recovery.

Although Indonesia is the sole Southeast Asian member of the Organization of Petroleum Exporting Countries (OPEC), slackening investment in oil exploration and extraction in the country has reduced output in recent years and made the country a net crude importer for several months in 2004.

Speaking after formally opening a new oil refinery in West Java, President Susilo Bambang Yudhoyono said "we have to face the fact that our oil production is dropping year to year" and called on producers to reverse the trend.

"The potential is there, lets do it," he said.

Corruption and government red-tape are the main obstacles to foreign investment in the sector, analysts say.

Susilo has pledged to battle graft and legal uncertainty, but both problems remain deep seated.

Fuel subsidies aimed at protecting poor Indonesians from the affect of high prices have risen with the price of crude on the global market, putting pressure on the government's budget.

Last year, it spent around US$7.4 billion in 2004, or 3 percent of gross domestic product, on subsidies.

Last week, the local currency hit a 3 1/2 year low against the dollar, partly because of high demand for the greenback by state- owned Pertamina oil company to fund oil imports.

The slide has alarmed the country, where memories of the 1998- 99 Asian economic crisis are still strong.

Economy minister Aburizal Bakrie has reiterated the government's intention of gradually increasing domestic fuel prices starting early next year.

The government hiked fuel prices by nearly 30 percent in March to help reduce pressure on the budget.

Another rise however, would likely spark anti-government protests among the country's 210 million people. -- AP