Forced by years of declining oil production caused by deteriorating oil infrastructure that has made it into a net importer of petroleum,  Indonesia has announced its decision to withdraw from the Organisation of Petroleum Exporting Countries, even as crude oil prices have reached record levels.

Leaving OPEC will help the country save  $3.1 million on membership fees a year, annually. After Indonesia's departure the 12-member OPEC will have 13 members as Angola and Ecuador were admitted to the cartel in January and December 2007, respectively. OPEC members account for more than 40 percent of the world's oil supply.

Indonesian energy and mineral resources minister Purnomo Yusgiantoro disclosed that the country would not renew its memebrship to the oil cartel at the end of the year. He however said that it could rejoin if production increased in line with the country's effort to raise capacity.

Indonesia has been an OPEC member since 1962 and has been considering leaving it for the past three years.

While other OPEC memebrs have reaped huge profits due to high global oil prices, has been hamstrung in its efforts to market its 4.37 billion barrels in proven reserves and has had to lower its 2008 sales forecasts from 1.03 million barrels a day to under 930,000 barrels due to the prevailing high oil prices. Accordingly, it would like OPEC to ease supply pressures by raising capacity to lower prices, which the rest of the OPEC members  have been reluctant to do.

Ironically Indonesia, the only South Asian OPEC country, which is also the largest economy in the region, but one of the smallest OPEC producers, has been forced to raise retail fuel prices by nearly  30 per cent in order to reduce the cost of subsiding fuel costs, leading to unrest as elections loom ahead next year. Subsidies to cap domestic diesel and gasoline prices may exceed $13 billion this year.

It imports about a third of its oil because of inadequate refining capacity and declining output caused by disputes with Exxon Mobil Corp. Moreover, its oil output has fallen by neqarly 50 per cent from peak production in 1977.
 
Analysts say the country's withdrawal from OPEC should stir planners to correct the years of declining investments that have led to a decline in prioduction since 1995.

The government earlier this year lowered its oil sales estimate for 2008 to 927,000 barrels a day from a previous 1 million barrels in 2003.
Kurtubi, an oil and gas analyst at the Center for Petroleum and Economics Studies, said the decline in Indonesia's oil production was a result of failure by successive governments to promote investment and exploration.

The only Southeast Asian member of the cartel has become a net oil importer and will not bother to renew its OPEC membership at the end of this year, Energy and Mineral Resources Minister Purnomo Yusgiantoro said.