Brunei Oil Plans

[The Oxford Business Group reported the following report on Brunei on 29th October 2011.]

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Brunei Darussalam: Plans on paper



With a radical overhaul of its energy sector planned, Brunei Darussalam is looking to ramp up production at the wellhead while expanding downstream activities through a long-term programme that is intended to quadruple national revenue and boost employment.

On September 21, the Sultanate unveiled the outline of its first ever Energy White Paper, which will serve as the blueprint for the oil and gas sector in the coming two decades and beyond. Under the programme, key points of which were made public at the Brunei Energy Expo 2011, the country’s GDP is set to increase from the current $12.6bn per annum to $50.6bn, with the energy sector’s contribution to rise from $3.9bn to $35.5bn.

To achieve this, Brunei Darussalam aims to increase production to 800,000 barrels of oil equivalent per day of oil and gas production, up from the present figure of around 200,000 barrels, but will also target massive growth in downstream industries.

The three core elements of the plan set out in the highlights of the white paper are the need to strengthen and grow upstream and downstream activities in hydrocarbons; to ensure secure, reliable and efficient supply and use of energy; and maximise economic spin-offs from the energy industry, with these targets to be achieved by 2030. The plan also foresees an additional 50,000 new jobs being created as a result of the expansion programme, with 5000 of these to be filled by local professionals.

According to Mahmod Yakop, the managing director of oil and gas services provider AMRTUR, the white paper has set out a vision for the country and the energy sector, though he says it is a vision that will need hard work to be fulfilled. “There are going to be serious challenges, and massive investment will need to be made in education, infrastructure and ease of doing business if there is any hope of getting anywhere near to this target,” he told OBG. “Brunei needs to be putting primary emphasis on oil and gas education to produce sufficient and high value human capital – something the country currently must have in place.”

The white paper touched on the necessity of training up professionals to meet the growing needs of the industry, and the minister of education, Pehin Abu Bakar Apong, has said that he and his officials will be working closely with the Ministry of Energy to develop educational programmes appropriate for the future of what he said was a “very encouraging vision”.

The two ministries will work together to discuss what is required and how this can be translated into “programmes that could be offered by institutions of higher learning in Brunei and also align ourselves with institutions overseas,” he told local media on September 22.

Quite apart from developing its downstream capacity and domestic workforce, Brunei Darussalam will also be looking to expand existing export markets and open up new ones. This should be one of the easiest components of the plans outlined by the white paper, with a number of countries in an ever-more energy-hungry Asia already expressing interest in the Sultanate’s proposed expansion of output.

Among those eyeing Brunei Darussalam’s ambitious expansion plans is RPN Singh, the minister of state for petroleum and gas for India. The Asian tiger is increasingly on the lookout for new energy sources to fuel its rapidly expanding economy, with the government seeking to promote the use of natural gas, with the Sultanate – along with Indonesia – being seen as a natural supplier.

“We are investing heavily in liquefied natural gas (LNG) infrastructure, and our current capacity of 13.5m tonnes per annum is set to more than double by 2015-16,” Singh told OBG at the recent ASEAN energy ministers meeting in the Sultanate, held in late September. “In this context, India is seeking long-term LNG supply contracts with both Indonesia and Brunei. Given the proximity and other factors, this could be a win-win situation for all three countries.”

Of course, much of what is set out in the white paper will depend on the Sultanate being able to maximise the life spans of existing fields and identifying and developing new resources. There have been some very promising offshore finds in recent years, with further deepwater research projects being conducted that could well locate the resources needed to meet the ambitious targets set by the white paper. What needs to be clarified is the overall cost of the project, how much of this cost will be met by the state and to what degree the private sector will be expected to participate.

That said, if Brunei Darussalam can boost its oil and gas production to the levels set out in the white paper, many of the remaining elements of the programme will fall into place as the Sultanate will have energy to burn for its downstream industries, and an export capacity sufficient to generate the revenue needed to develop them.

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