• 5 hours UK On Track To Approve Construction of “Mini” Nuclear Reactors
  • 9 hours LNG Glut To Continue Into 2020s, IEA Says
  • 11 hours Oil Nears $52 With Record OPEC Deal Compliance
  • 14 hours Saudi Aramco CEO Affirms IPO On Track For H2 2018
  • 16 hours Canadia Ltd. Returns To Sudan For First Time Since Oil Price Crash
  • 17 hours Syrian Rebel Group Takes Over Oil Field From IS
  • 3 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 3 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 3 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 3 days Schlumberger Warns Of Moderating Investment In North America
  • 3 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 3 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 4 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 4 days New Video Game Targets Oil Infrastructure
  • 4 days Shell Restarts Bonny Light Exports
  • 4 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 4 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 4 days British Utility Companies Brace For Major Reforms
  • 4 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 4 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 4 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 5 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 5 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 5 days Rosneft Signs $400M Deal With Kurdistan
  • 5 days Kinder Morgan Warns About Trans Mountain Delays
  • 5 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 5 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 5 days Russia, Saudis Team Up To Boost Fracking Tech
  • 6 days Conflicting News Spurs Doubt On Aramco IPO
  • 6 days Exxon Starts Production At New Refinery In Texas
  • 6 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 6 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 7 days China To Take 5% Of Rosneft’s Output In New Deal
  • 7 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 7 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 7 days VW Fails To Secure Critical Commodity For EVs
  • 7 days Enbridge Pipeline Expansion Finally Approved
  • 7 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 7 days OPEC Oil Deal Compliance Falls To 86%
Big Oil Refuses To Give Up On The Barents Sea

Big Oil Refuses To Give Up On The Barents Sea

Despite failures in the Barents…

The U.S. Shale Play To Watch In 2018

The U.S. Shale Play To Watch In 2018

The original U.S. shale gas…

Tiny Oil Kingdom Brunei Moves To Diversify From Oil

Brunei Mosque

Brunei is notorious for its oil riches, which are disproportionately huge for its tiny size of 2,200 square miles (and a population of less than half a million), and for the fact that its sultans are among the world’s wealthiest individuals thanks to these riches. Yet, the latest price rout in oil has forced Brunei, like other major producers, to start thinking about moving away from oil.

To date, Brunei is the fourth-largest producer of crude oil in Asia, pumping 126,000 barrels daily in 2014, with around 90 percent of budget revenues coming from the energy industry. Oil revenues also contribute as much as 60 percent to GDP. With the price of crude on international markets slumping to below US$30 by this January, Brunei has found it increasingly difficult to cope with this dependency.

After decades of low or no taxes, free education and subsidized housing, the locals – the majority of whom are employed by the public sector – will find it equally difficult to adjust to a new era of cheap oil. To avoid angering them, the government has been slow to introduce public spending cuts necessitated by the new oil price environment and the recession that has held Brunei in its grips since 2013.

The time has been ripe for a change and, with a somewhat unexpected foresight on the part of the government, the seeds of this change were sowed eight years back with Brunei’s Vision 2035 plan. The plan places a major focus on infrastructure projects as a driver for GDP, as well as an emphasis on the financial sector.

Brunei is already among the leading issuers of sukuk – the Islamic bonds that are enjoying growing international interest. According to the Oxford Business Group, sukuk is likely to gain further attention in an increasingly uncertain financial world that’s still dealing with the fallout from the 2008 crisis. In such an environment, Brunei could be well placed to make the best of its double focus on finance and infrastructure, seeing as sukuk bonds are often used for infrastructure projects in emerging economies in Asia.

But what about oil? Prices will sooner or later recover, or so say most oil market analysts. Demand will improve, and it will be driven by Asian economies, they say. Would Brunei be able to get its share of this new demand?

Related: The End Of The Petro-State Era

Unfortunately for the kingdom, its oil reserves are nearing depletion. Offshore drilling in the country’s waters is economically unviable for the state. So, for Brunei, a diversification away from oil is even more urgent than for Saudi Arabia or Russia. Since complete independence of the energy industry is impossible, Brunei has turned its eyes to China.

Asia’s largest economy has been pushing for control over the oil and gas of the South China Sea for a while now. It’s been wrangling with its neighbors there (aside from Brunei, these are Vietnam, the Philippines, Malaysia, and Indonesia) and insisting that these disputes are settled directly between the countries involved rather than by an international body such as the UN Permanent Arbitration Court, which is due to rule on one such dispute, with the Philippines, any day now.

Related: Is America’s Vision for Renewal Energy a Mirage? 

Surrounded by what it deems enemies in the South China Sea, Beijing has reached out to Brunei, offering it production-sharing options for the South China Sea plus other economic incentives in exchange for Brunei’s support for its claims. With few alternative options, Brunei has accepted.

If the kingdom stays on the course of diversification, and with China’s backing to count on, it could gain more regional importance over the next few years and beyond as Asia continues to spearhead global economic growth at the expense of Europe and North America. What Brunei will do with this importance remains to be seen.

By James Burgess of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News