Friday, 2 December 2016

Indonesia’s oil supply security unlikely to be affected by OPEC withdrawal

In Oil & Companies News 02/12/2016

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Indonesia’s withdrawal from OPEC membership is unlikely to affect the country’s oil supply security, given the limited benefits seen since it rejoined the group on January 1 this year, industry observers said.
The net importer of crude oil had expected OPEC membership re-activation as a step towards energy security, but saw little benefit in terms of price and supply from other group members.
Indonesia reactivated its OPEC membership in order to have direct access to crude oil exporters, energy and mines ministry spokesman Sujatmiko said Thursday, adding that with access routes having been opened, the membership did not offer anything more to the country.
“The OPEC membership for Indonesia is useless as we have to pay Eur2 million [in annual fees] but we cannot get cheap crude imports,” said Komaidi Notonegoro, an analyst with the ReforMiner Institute.
“The only benefit of the membership is rapid information about crude supply from producers,” he added.
Indonesia’s withdrawal from OPEC follows a disagreement with the decision Wednesday to freeze the group’s collective output at 32.5 million b/d.
OPEC asked Indonesia to cut its production by 5%, or about 37,000 b/d, which was difficult for the country, energy and mines minister Ignasius Jonan said in a statement Thursday.
“The production cut would have been a risk for Indonesia, which depends on crude for revenue,” Notonegoro added.
“Indonesia’s need of revenue [from oil and gas] is still huge and in the 2017 draft state budget it was decided to cut oil production by 5,000 b/d,” Jonan said.
“Indonesia can cooperate with other crude producers through good diplomacy without being an OPEC member,” Notonegoro said, citing state-owned company Pertamina’s refinery and crude supply deals with Saudi Aramco and Russia’s Rosneft.
“The most important aspect of energy security is not being an OPEC member, but building strategic petroleum reserves,” Inas Nasrullah, member of Commission VII on Energy and Mines Issues, said.
RISING CRUDE NEEDS
Indonesia’s crude oil output peaked at 1.6 million b/d in 1995 and has since fallen due to natural decline at ageing fields. The country is expected to produce 780,000 b/d in 2017, from a forecast output of 820,000 b/d this year, according to upstream regulator SKK Migas.
Meanwhile, it has embarked on a massive refinery expansion drive which will boost its crude demand.
Indonesia’s refining capacity is expected to rise from 1.02 million b/d currently to at least 1.75 million b/d in the next 10 years.
Its existing refineries produce only around 800,000 b/d of oil products, which meets only about 50% of the country’s needs.
The country exported 12.06 million mt (322,627 b/d) of crude oil and imported 13.51 million mt (361,417 b/d) over January-September, according to latest data from Statistics Indonesia.
OPEC has agreed to distribute the cut that was allotted to Indonesia among the group’s remaining 13 members.
OPEC’s agreement to freeze output — the group’s first coordinated cut since the 2008 financial crisis — amounts to an approximate 1.2 million b/d cut from current output levels.
Under the deal, Saudi Arabia agreed to cut its production by 486,000 b/d from its October level as estimated by OPEC’s secondary sources to 10.046 million b/d.
The agreement is linked to key non-OPEC producers also agreeing to cut 600,000 b/d, of which Russia has agreed to absorb 300,000 b/d.


Source: Platts