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Indonesia rejoins OPEC
Topic Started: Dec 3 2015, 01:09 AM (123 Views)
MSantor
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Quote:
 
And Then There Were 13: Indonesia Rejoins OPEC

Indonesia’s return to the oil cartel will have some interesting implications.

By Kirstin Berndt
December 02, 2015

Just days remain before Indonesia regains formal OPEC membership at the cartel’s December 4meeting in Vienna. The move has many in the energy industry still scratching their heads at OPEC’s latest direction. In an environment of rock-bottom oil prices, adding to the global energy surplus through the integration of an additional member appears counter-productive.

Indonesia is hardly an influential player in the energy market. The country renounced its membership in 2009 because it had become a net energy importer rather than a net producer, and not much has changed. Indonesia’s re-integration will add roughly 825,000 barrels a day to OPEC’s total output – around 1 percent of total global production. This meager contribution will place the country alongside OPEC’s least significant producers such as Libya and Ecuador.

Yet even this small output increase will affect OPEC in an era of unprofitable production. For Saudi Arabia, this aligns with the strategic goal of increasing market share, however incrementally. OPEC’s more desperate members, however, will not be pleased by the addition of another voice to the bargaining table. Venezuela, Nigeria, and other struggling nations have long been pressuring Saudi Arabia to cut production, and will now face an incoming member with very different priorities. While OPEC’s struggling producers have structured their economies around high oil prices, Indonesia will continue to remain a net importer of oil with a vested interest in keeping oil prices low to accelerate domestic growth. Indonesia has a challenging road ahead to regain influence among OPEC’s disgruntled members, especially after a seven-year hiatus.

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