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Indonesia struggles to capitalize on its oil

OPEC's only Asian member, it has failed to meet its production quota and is quitting the cartel this year.

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With crude oil fetching over $140 a barrel, these should be the best of times for resource-rich Indonesia, the only Asian oil producer in the Organization of Petroleum Exporting Countries (OPEC).

Instead, Indonesia is quitting the cartel at the end of the year. Falling output from aging oil fields and a paucity of major new finds has left it unable to meet its OPEC production quota. Since 2004, it has been a net importer of oil.

The global thirst for oil – and predictions that high pump prices are here to stay – should be helping Indonesia's pitch to foreign oil companies who are constantly scouring the globe for new hydrocarbon deposits. Last week, Raden Priyono, head of BP Migas, the government regulatory agency for oil production, told reporters that 35.8 million barrels' worth of oil reserves had been discovered so far this year.

In 2007, Indonesia had 4.4 billion barrels in proven reserves, according to the CIA Factbook. That's more than either Malaysia and Vietnam, its nearest regional rivals, and just below Ecuador. Reserves in Saudi Arabia, the largest producer, are estimated at 264 billion barrels.

But Indonesia's pitch to oil companies has been soured by legnthy contract disputes, corruption scandals, fuzzy regulations, and friction with revenue-hungry local authorities. As oil exploration has faltered, output has suffered: Last year Indonesia only managed to pump an average 950,000 barrels a day, the 12th straight year of declines. OPEC's combined output in April was 29.7 million barrels a day.


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