OPEC : Welcome back, Indonesia!

Welcome back, Indonesia!

OPEC Bulletin Commentary December 2015

One subtle, yet defining difference became apparent when OPEC’s Oil and Energy Ministers sat down for the start of their 168th Meeting of the OPEC Conference in Vienna on December 4. One extra place had been set around the Conference table.

For after an absence of some seven years, Indonesia made its return to the OPEC fold. There were no fanfares, no effusive speeches — just the obligatory welcome. It was, as expected, suitably understated. For the Organization, the message was clear; it was as if its only Southeast Asian Member had never been away!

What is significant, though, is that an Organization of 12 Member Countries once again became 13. One has to go back to 2007 to find when it last had that number of signatories. That was when Angola joined OPEC and Ecuador, which had suspended its Membership in 1992, rejoined.

Indonesia too suspended its Membership. That was in December 2008 when its oil-exporting capability began to wane. But prior to this, the country proved to be a high-profile presence within the Organization. It gave some 46 years of outstanding commitment to the fledgling group as OPEC continued to establish itself on the world stage.

Over the years, high-ranking officials from Indonesia have helped guide OPEC, whether in their capacity as Secretary General or Conference President. And numerous officers have worked at the Vienna OPEC Secretariat in various disciplines, helping to develop the Organization’s international standing, particularly as a leading research establishment on petroleum, the world economy and energy issues in general.

One of OPEC’s most prominent and popular Secretary Generals was an Indonesian. Dr Subroto, a respected professor and lecturer, oversaw the Secretariat from 1988 to 1994. As his country’s Minister of Mines and Energy for ten years and a familiar face as OPEC Conference President, he used his considerable knowledge and charisma to help put OPEC on the global map. And he still attends energy fora today, at the age of 87!

Indonesia’s return to OPEC follows the election of the country’s new President, Joko Widodo, in 2014. Together with Minister of Energy and Mineral Resources, Sudirman Said, they decided the time was ripe to once more take their seat at the OPEC Conference table and help the Organization as it strives to steer an orderly path for the oil market in the testing years ahead.

“It is my privilege to welcome His Excellency Sudirman Said, Minister of Energy and Mineral Resources of Indonesia, who is here representing his country as it re-activates its OPEC Membership today after a seven-year suspension,” OPEC Conference President, Dr Emmanuel Ibe Kachikwu, said in his opening address to the Meeting.

“We welcome you back, Your Excellency, and look forward to fruitful collaboration in the future,” added Kachikwu, who is Nigeria’s Minister of State for Petroleum Resources.

His remarks were later endorsed by the full Conference which approved and welcomed the resumption of Indonesia’s full Membership in its official communiqué.

Indonesia’s return to OPEC could not be coming at a more challenging time with international crude oil prices coming under further pressure in the last few weeks.

And as alluded to by both Conference President Kachikwu and OPEC Secretary General, Abdalla Salem El-Badri, the time for concerted cooperation among the industry’s main stakeholders has never been more crucial.

Kachikwu, addressing the customary press conference, called on non-OPEC oil producers to join the Organization in a “stability drive”.

“We are looking to hold further meetings with non-OPEC producers to reach some common goals,” he said. “We also need to look at other parameters for maintaining the oil price.”

The Organization has already held two technical meetings with several leading non-OPEC producers, including Russia, but as El-Badri explained, even though the response was positive, it would take time for countries to digest the request for joint action and to determine how it could be achieved.

“We need to negotiate more with non-OPEC to see how we can reach a collective effort. All of us should contribute to the market,” he maintained.

The message was again made clear that OPEC cannot singlehandedly cure the oil market’s current ills. “We are only 35-40 per cent global producers — there are still 60–65 per cent producers out there,” Kachikwu pointed out, referring to the respective market shares held by OPEC and non-OPEC producers.

Indonesia’s renewed presence in OPEC will undoubtedly add another important string to the Organization’s bow as it addresses the market’s current problems. There is also the added advantage that the country has just also become an Associate Member of the International Energy Agency (IEA) and sees itself acting as a “bridge” between the producers and the consumers.

However it all pans out going forward, OPEC — complemented by its ‘new’ Member — will do its utmost to bring about oil market stability, which is in the interest of all market players. The stability drive referred to by Conference President Kachikwu is certainly achievable — if ALL stakeholders contribute and pull in the same direction.

OPEC Bulletin December 2015

Download document