Energy profile of Brunei
Published: January 18, 2007, 8:00 pm
Updated: August 20, 2011, 3:09 pm
This article has been reviewed by the following Topic Editor:
Cutler J. Cleveland
Introduction
The energy profile of Brunei is based heavily upon proceeds from exports of crude oil and natural gas, with revenues from the hydrocarbons sector accounting for half of gross domestic product (GDP), around 90 percent of merchandise exports, and 80 percent of government revenues. Per capita GDP places Brunei among the World Bank's high-income non-OECD group of countries, with substantial income from overseas investment supplementing income from domestic sources. The country's manufacturing sector is very small. The government provides for all medical services and subsidises food and housing. Real GDP growth for 2005 is estimated to be 2.6 percent, up from the 1.7 percent growth reported in 2004.
The chief economic problems of Brunei include lack of diversity in the economy, heavy reliance on the volatile oil and natural gas sectors, huge state subsidies, a civil service which employs over half of Brunei's workforce, extensive state economic controls, a small tax base (the country has no personal income tax and a low tariff regime), and only slow movement towards privatization. In 1998, the collapse of Amedeo Development Corporation, run by Prince Jefri, and the loss of many billions of dollars caused a financial crisis.
Brunei would like to diversify away from hydrocarbons into areas like communications technology, financial services, rubber, rice farming, halal (Muslim dietary law) food, and forestry services. Brunei is interested in energy-intensive industries like petrochemicals, oil refining, and aluminum smelting. Brunei also would like to turn itself into a major shipping hub. In January 2003, Brunei unveiled plans aimed at attracting $4.5 billion in foreign investment by 2008 and at diversifying the economy. The Brunei Economic Development Board (BEDB) is looking at building a 500-megawatt power plant, a new jetty, and a container port in the Sungai Liang area both to tap into the country's natural gas resources as well as to help establish new industries. The country is located close to vital sea lanes through the South China Sea, linking the Indian and Pacific Oceans. As such, the country is potentially well-positioned to take advantage of international shipping through the region.
Oil
Oil Production in Brunei, 1980-2005. (Source: EIA International Energy Annual)
Brunei contains proven crude oil reserves of 1.35 billion barrels, as estimated in January 2006. In 2005 Brunei produced 237,000 bbl/d, of which 215,000 bbl/d was crude oil, plus around 22,000 bbl/d of natural gas liquids. Oil production in Brunei began in 1929, with the discovery of the giant onshore Seria Field. Production from Seria peaked at around 115,000 bbl/d in the 1950s, but has now fallen to around 27,000 bbl/d. Brunei's oil production peaked in 1979 at about 240,000 bbl/d, but was cut back deliberately to extend life of the fields and to improve recovery rates. Overall, the country's upstream oil sector requires around $300 million annually, according to the Petroleum Economist, in order simply to maintain current production capacity from mature fields.
Brunei's oil industry is completely dominated by Brunei Shell Petroleum (BSP). BSP extracts oil from seven offshore oil fields, including Champion (which contains about 40 percent of total oil reserves and produces around 50,000 bbl/d), Southwest Ampa (the oldest field, with more than half of Brunei's natural gas reserves and production), Fairley, Fairley-Baram, Gannet, Magpie (producing since 1977, now at 10,000 bbl/d), and Iron Duke. BSP also operates two onshore fields (Rasau and Seria-Tali). Another field, Egret, is expected to come online for oil production in 2006 and produce about 30 million barrels of oil over the next 15-20 years. Major customers for Brunei's oil include Japan, South Korea, the United States, Australia, New Zealand, China, and India.
BSP, a 50-50 joint venture between Royal Dutch/Shell and the government of Brunei, for years had been the only oil producer in the country and still operates the country's only oil refinery. Recently, the sector has opened to other players. In early 2002, for instance, Total, S.A. of France (which has been active in Brunei since the 1980s) was awarded an exploration license in Brunei's deepwater Block J, located around 60 miles offshore, along with partners BHP Billiton Petroleum (25 percent share) and Amerada Hess (15 percent).
Brunei has an outstanding territorial dispute with neighboring Malaysia over the deep-sea acreage that includes blocks J and K off the coast of Borneo. In June 2003, Total suspended exploration work in Block J, following an April 2003 incident in which several naval patrol boats from Malaysia chased away a Total ship. In 2003, Murphy Oil (U.S.) and Petronas (Malaysia) discovered a large (700-million-barrel) oil field – called "Kikeh" – which may extend into Block J. Brunei claims that Block J and the adjacent Block K (awarded to a joint venture of Shell, Conoco and Mitsubishi) are completely within its Exclusive Economic Zone (EEZ). Brunei is counting on Blocks J and K to maintain the country's oil and gas output another decade or more, and without these Blocks, Brunei may be forced to move more rapidly away from an economy based on hydrocarbons.
Malaysian officials have offered to devise a joint-development zone with Brunei, but this would necessitate Brunei redrawing its contracts with Shell, Conoco, and Mitsubishi. In March 2004 Shell Malaysia announced a new oil discovery at Gumusut, near the disputed territory. The status of oil development in these disputed areas remains unresolved.
Downstream
Brunei has one refinery, part of BSP, with a capacity of about 8,600 bbl/d. Around 5,000-6,000 bbl/d of the refinery's output is used for local consumption. The remainder of Brunei's crude oil is exported and refined elsewhere.
Natural Gas
Natural Gas Production in Brunei, 1980-2003. (Source: EIA International Energy Annual)
Brunei produced around 400 billion cubic feet (Bcf) of natural gas in 2003. Around 90 percent of gas destined for the country's one liquefied natural gas (LNG)terminal is produced by BSP and the rest by Total S.A. Discussions are underway now to determine whether sales of gas to new domestic industrial customers would be economically advantageous over the current policy of exporting almost all of Brunei's gas production.
Brunei became the first Asian liquefied natural gas (LNG) exporter in 1972. Today, Brunei is the fourth-largest producer of LNG in the world and the third-largest natural gas producer in Southeast Asia. Major customers for Brunei's LNG exports include Japan, which takes around 85 percent of Brunei's LNG exports under a 20-year contract renewed in 1993, and South Korea, which imports about 11 percent of Brunei's exports. The Brunei LNG (BLNG) joint venture between Mitsubishi (25 percent), Shell (25 percent), and the Brunei government (50 percent) produces Brunei's LNG at the company’s Lumut plant. Lumut produces about 330 bcf of LNG annually. The vast majority of BLNG sales are on a long-term contract basis, although there have been a few spot sales to Spain and the United States.
Long-term prospects for natural gas and LNG development in Brunei are excellent. BLNG has a master plan to expand its capacity by adding another 194 Bcf-per-year train to its existing five trains by 2008. The plan also includes further modernization of the existing plant, similar to the rejuvenation program carried out by Shell Global Solutions and completed in 1994. As a result of the program, the Lumut plant now operates at 140 percent of its design capacity.
In 2004, BLNG undertook the replacement of the plant's Main Cryogenic Heat Exchangers (MCHE) after 30 years of operation. The first of four new MCHEs was erected in February 2004. BLNG is in the process of replacing the remaining MCHEs. The MCHE replacement is expected to extend the life of the facility for another 30 years. Additionally, BSP contracted with Shell Global Solutions for a $400 million revitalization of gas extraction facilities in the Ampa and Fairley fields.
Besides exports, Brunei would like to use its natural gas to develop domestic petrochemicals and energy-intensive industries. The government signed a memorandum of understanding with American aluminum producer, Alcoa, in September 2003 to study the feasibility of constructing a $1.5 billion gas-fired aluminum smelter in Seria. The Brunei Economic Development Board has reportedly offered discounted gas to the plant.
Electricity
Brunei's installed electric generating capacity in 2003 was 0.48 gigawatts (GW), all of which was natural gas-fired. Brunei's power demand is growing at a rapid rate of 7 to 10 percent annually. Brunei's power plants all operate single natural gas turbines, with the exception of the Lumut cogeneration facilities and the new Belingus Power Station. Household customers account for 38 percent of electricity usage in Brunei and represent 63 percent of customers, while the government accounts for 29 percent of usage but only 6 percent of customers. The oil and gas sector and commercial customers account for 15 percent and 19 percent of electricity usage respectively.
Further Reading
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Citation
Eia (Content Source);Cutler J. Cleveland (Topic Editor) "Energy profile of Brunei". In: Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). [First published in the Encyclopedia of Earth January 18, 2007; Last revised Date August 20, 2011; Retrieved May 23, 2013 <http://www.eoearth.org/article/Energy_profile_of_Brunei>
Introduction
The energy profile of Brunei is based heavily upon proceeds from exports of crude oil and natural gas, with revenues from the hydrocarbons sector accounting for half of gross domestic product (GDP), around 90 percent of merchandise exports, and 80 percent of government revenues. Per capita GDP places Brunei among the World Bank's high-income non-OECD group of countries, with substantial income from overseas investment supplementing income from domestic sources. The country's manufacturing sector is very small. The government provides for all medical services and subsidises food and housing. Real GDP growth for 2005 is estimated to be 2.6 percent, up from the 1.7 percent growth reported in 2004.
The chief economic problems of Brunei include lack of diversity in the economy, heavy reliance on the volatile oil and natural gas sectors, huge state subsidies, a civil service which employs over half of Brunei's workforce, extensive state economic controls, a small tax base (the country has no personal income tax and a low tariff regime), and only slow movement towards privatization. In 1998, the collapse of Amedeo Development Corporation, run by Prince Jefri, and the loss of many billions of dollars caused a financial crisis.
Brunei would like to diversify away from hydrocarbons into areas like communications technology, financial services, rubber, rice farming, halal (Muslim dietary law) food, and forestry services. Brunei is interested in energy-intensive industries like petrochemicals, oil refining, and aluminum smelting. Brunei also would like to turn itself into a major shipping hub. In January 2003, Brunei unveiled plans aimed at attracting $4.5 billion in foreign investment by 2008 and at diversifying the economy. The Brunei Economic Development Board (BEDB) is looking at building a 500-megawatt power plant, a new jetty, and a container port in the Sungai Liang area both to tap into the country's natural gas resources as well as to help establish new industries. The country is located close to vital sea lanes through the South China Sea, linking the Indian and Pacific Oceans. As such, the country is potentially well-positioned to take advantage of international shipping through the region.
Oil
Oil Production in Brunei, 1980-2005. (Source: EIA International Energy Annual)
Brunei contains proven crude oil reserves of 1.35 billion barrels, as estimated in January 2006. In 2005 Brunei produced 237,000 bbl/d, of which 215,000 bbl/d was crude oil, plus around 22,000 bbl/d of natural gas liquids. Oil production in Brunei began in 1929, with the discovery of the giant onshore Seria Field. Production from Seria peaked at around 115,000 bbl/d in the 1950s, but has now fallen to around 27,000 bbl/d. Brunei's oil production peaked in 1979 at about 240,000 bbl/d, but was cut back deliberately to extend life of the fields and to improve recovery rates. Overall, the country's upstream oil sector requires around $300 million annually, according to the Petroleum Economist, in order simply to maintain current production capacity from mature fields.
Brunei's oil industry is completely dominated by Brunei Shell Petroleum (BSP). BSP extracts oil from seven offshore oil fields, including Champion (which contains about 40 percent of total oil reserves and produces around 50,000 bbl/d), Southwest Ampa (the oldest field, with more than half of Brunei's natural gas reserves and production), Fairley, Fairley-Baram, Gannet, Magpie (producing since 1977, now at 10,000 bbl/d), and Iron Duke. BSP also operates two onshore fields (Rasau and Seria-Tali). Another field, Egret, is expected to come online for oil production in 2006 and produce about 30 million barrels of oil over the next 15-20 years. Major customers for Brunei's oil include Japan, South Korea, the United States, Australia, New Zealand, China, and India.
BSP, a 50-50 joint venture between Royal Dutch/Shell and the government of Brunei, for years had been the only oil producer in the country and still operates the country's only oil refinery. Recently, the sector has opened to other players. In early 2002, for instance, Total, S.A. of France (which has been active in Brunei since the 1980s) was awarded an exploration license in Brunei's deepwater Block J, located around 60 miles offshore, along with partners BHP Billiton Petroleum (25 percent share) and Amerada Hess (15 percent).
Brunei has an outstanding territorial dispute with neighboring Malaysia over the deep-sea acreage that includes blocks J and K off the coast of Borneo. In June 2003, Total suspended exploration work in Block J, following an April 2003 incident in which several naval patrol boats from Malaysia chased away a Total ship. In 2003, Murphy Oil (U.S.) and Petronas (Malaysia) discovered a large (700-million-barrel) oil field – called "Kikeh" – which may extend into Block J. Brunei claims that Block J and the adjacent Block K (awarded to a joint venture of Shell, Conoco and Mitsubishi) are completely within its Exclusive Economic Zone (EEZ). Brunei is counting on Blocks J and K to maintain the country's oil and gas output another decade or more, and without these Blocks, Brunei may be forced to move more rapidly away from an economy based on hydrocarbons.
Malaysian officials have offered to devise a joint-development zone with Brunei, but this would necessitate Brunei redrawing its contracts with Shell, Conoco, and Mitsubishi. In March 2004 Shell Malaysia announced a new oil discovery at Gumusut, near the disputed territory. The status of oil development in these disputed areas remains unresolved.
Downstream
Brunei has one refinery, part of BSP, with a capacity of about 8,600 bbl/d. Around 5,000-6,000 bbl/d of the refinery's output is used for local consumption. The remainder of Brunei's crude oil is exported and refined elsewhere.
Natural Gas
Natural Gas Production in Brunei, 1980-2003. (Source: EIA International Energy Annual)
Brunei produced around 400 billion cubic feet (Bcf) of natural gas in 2003. Around 90 percent of gas destined for the country's one liquefied natural gas (LNG)terminal is produced by BSP and the rest by Total S.A. Discussions are underway now to determine whether sales of gas to new domestic industrial customers would be economically advantageous over the current policy of exporting almost all of Brunei's gas production.
Brunei became the first Asian liquefied natural gas (LNG) exporter in 1972. Today, Brunei is the fourth-largest producer of LNG in the world and the third-largest natural gas producer in Southeast Asia. Major customers for Brunei's LNG exports include Japan, which takes around 85 percent of Brunei's LNG exports under a 20-year contract renewed in 1993, and South Korea, which imports about 11 percent of Brunei's exports. The Brunei LNG (BLNG) joint venture between Mitsubishi (25 percent), Shell (25 percent), and the Brunei government (50 percent) produces Brunei's LNG at the company’s Lumut plant. Lumut produces about 330 bcf of LNG annually. The vast majority of BLNG sales are on a long-term contract basis, although there have been a few spot sales to Spain and the United States.
Long-term prospects for natural gas and LNG development in Brunei are excellent. BLNG has a master plan to expand its capacity by adding another 194 Bcf-per-year train to its existing five trains by 2008. The plan also includes further modernization of the existing plant, similar to the rejuvenation program carried out by Shell Global Solutions and completed in 1994. As a result of the program, the Lumut plant now operates at 140 percent of its design capacity.
In 2004, BLNG undertook the replacement of the plant's Main Cryogenic Heat Exchangers (MCHE) after 30 years of operation. The first of four new MCHEs was erected in February 2004. BLNG is in the process of replacing the remaining MCHEs. The MCHE replacement is expected to extend the life of the facility for another 30 years. Additionally, BSP contracted with Shell Global Solutions for a $400 million revitalization of gas extraction facilities in the Ampa and Fairley fields.
Besides exports, Brunei would like to use its natural gas to develop domestic petrochemicals and energy-intensive industries. The government signed a memorandum of understanding with American aluminum producer, Alcoa, in September 2003 to study the feasibility of constructing a $1.5 billion gas-fired aluminum smelter in Seria. The Brunei Economic Development Board has reportedly offered discounted gas to the plant.
Electricity
Brunei's installed electric generating capacity in 2003 was 0.48 gigawatts (GW), all of which was natural gas-fired. Brunei's power demand is growing at a rapid rate of 7 to 10 percent annually. Brunei's power plants all operate single natural gas turbines, with the exception of the Lumut cogeneration facilities and the new Belingus Power Station. Household customers account for 38 percent of electricity usage in Brunei and represent 63 percent of customers, while the government accounts for 29 percent of usage but only 6 percent of customers. The oil and gas sector and commercial customers account for 15 percent and 19 percent of electricity usage respectively.
Further Reading
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Disclaimer: This article is taken wholly from, or contains information that was originally published by, the Energy Information Administration. Topic editors and authors for the Encyclopedia of Earth may have edited its content or added new information. The use of information from the Energy Information Administration should not be construed as support for or endorsement by that organization for any new information added by EoE personnel, or for any editing of the original content.
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