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.

Last week, Indonesia's anticorruption agency said it was investigating BP Migas for allegedly underreporting oil output between 2000 and 2007, with potential losses to the state of $21 billion. Smuggling of subsidized fuel to nearby countries has long plagued the industry, which was a source of corruption and patronage for decades under former President Suharto.

"There doesn't seem to be one big factor that says 'don't explore' and 'don't develop.' But there are many little factors that keep Indonesia from being the next big oil boom," says Arian Ardie, a senior partner of Navitas Strategic Consulting in Jakarta, which advises foreign clients in the energy sector.

Analysts say foreign oil companies are deterred by revenue-sharing contracts in Indonesia that typically allocate 85 percent of income to government coffers and 15 percent to private companies, with a 70/30 split for deepwater deposits. Other emerging oil-producing countries such as East Timor offer a far more equitable split to foreign producers.

Having already exhausted most of its richest oil fields, Indonesia is looking less attractive to oil majors that put a premium on size, says John Vautrain, a Singapore-based senior vice president for Pervin & Gertz, a US oil consultancy.

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