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Singapore: Indonesia, the biggest oil producer in South East Asia, formally pulled out of Opec as the region's biggest economy becomes increasingly dependent on imports after failing to raise output.
The Organisation of Petroleum Exporting Countries (Opec), which pumps more than 40 per cent of the world's oil, yesterday agreed to suspend Indonesia's membership at the country's request. The nation, part of the group since 1962, has considered leaving for the past three years as it failed to meet output targets stipulated within the producer group.
Indonesia imports about a third of its oil and production has slumped 49 per cent from a peak in 1977, partly as disputes with ExxonMobil delayed field developments and deterred investments.
Subsidies to cap domestic diesel and gasoline prices may exceed 180.3 trillion rupiah ($19.3 billion) this year as a lack of refining capacity forces the nation to import fuels from neighbouring countries such as Singapore.
"It was long overdue for Indonesia to step out because as a net importer it didn't make sense to stay on,'' said Anthony Nunan, assistant general manager for risk manager at Mitsubishi Corp in Tokyo. "And since they couldn't even make the quota, there was not much to gain anyway.''
Gain
The withdrawal from Opec will help the nation save 2 million euros ($2.8 million) on membership fees a year, according to Indonesian Energy Minister Purnomo Yusgiantoro. Indonesia's plan to leave Opec became more pressing as crude prices in New York reached $147.27 a barrel on July 11. Prices, which have fallen 30 per cent from the record, are 34 per cent higher than a year ago.
In May, Indonesia raised fuel prices by almost 30 per cent to reduce the government's subsidy burden of capping pump prices.
Opec ministers on Tuesday agreed to a total production limit for 11 members of 28.8 million barrels a day.
The lower total reflects the suspension of Indonesia's membership and is 520,000 barrels per day below the group's actual July output, the group's president Chakib Khelil said at a press conference.
Indonesia's crude output was little changed in August at 863,724 barrels per day from a month earlier, BPMigas, the country's oil and gas regulator said on August 29.
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