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OPEC will stick with dollar, president says

The Organisation of Petroleum Exporting Countries would not adopt the euro to replace the US dollar as the currency for oil sales, the body's president, Purnomo Yusgiantoro, said yesterday.

"Our members have different markets so I think the dollar is still the best," Mr Purnomo told reporters in Jakarta.

The euro held near a record high against the dollar in Asian trading after Russia's central bank said it might raise holdings of the European currency.

A weaker dollar makes dollar-denominated oil cheaper for buyers using other currencies and reduces the buying power of countries that export oil.

OPEC is pumping at its highest rates in 25 years after crude oil prices last month soared to $US55.67 a barrel in New York, the highest in more than two decades of futures trading.

Crude prices have since fallen 12 per cent as concern about shortages and disruptions to supply from Iraq, Nigeria and Russia has abated.

Mr Purnomo - who is also Indonesia's Energy Minister - said the Government was planning fiscal incentives, including tax cuts, to encourage overseas energy and mining companies to develop deposits in the country.

"It can be done in the form of a joint ministerial letter or in a presidential decree," he said. "We don't know the details yet, but it may include some tax cuts. As you know, it is expected to lure investors. Our investment in mining has been falling, while spending on oil and gas has been stagnant."

Mr Purnomo also announced that Rachmat Sudibyo, the chairman of BPMigas, Indonesia's state oil and gas regulator, would retire next year.

He said John Browne, chief executive of BP plc, the world's No. 2 oil company by market value, would meet Indonesian President Susilo Bambang Yudhoyono today to discuss expanding the $US5 billion ($6.35 billion) Tangguh liquefied natural gas plant. Mr Purnomo said he would seek details on the possible construction of a third production line at Tangguh, in the easternmost province of Papua, to help meet rising demand for LNG in Asia and the Americas.

On October 1, BP said Tangguh's first two production lines would be expanded to 8 million tonnes because sales had exceeded the 7 million tonnes of capacity under initial plans. Last month BP signed contracts to supply 3.7 million tonnes of LNG to San Diego- based Sempra Energy, bringing sales to 7.6 million tonnes.

In July, the Tangguh partners signed contracts with South Korea's K-Power Co and POSCO to supply about 1.15 million tonnes of LNG a year for 20 years.

In 2002, Tangguh won a contract to supply 2.6 million tonnes a year of the fuel to a plant in China's Fujian province.

Bloomberg

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