Brunei is a small yet wealthy country in Southeast Asia, with a strong economy supported by exports of crude oil and natural gas. The country boasts one of the highest per capita incomes in Asia, and its citizens enjoy free medical services and subsidised food and housing provided by the government. However, the economy is largely dependent on the petroleum sector, which contributes over half of the country's GDP. Brunei is the third-largest oil producer in Southeast Asia and the ninth-largest producer of liquefied natural gas globally. While the country has made efforts to diversify its economy, it still heavily relies on oil and gas revenues, making it vulnerable to fluctuations in commodity prices.
What You'll Learn
- Brunei's economy is almost entirely dependent on oil and gas exports
- Brunei has one of the highest per capita incomes in Asia
- Brunei is the third-largest oil producer in Southeast Asia
- Brunei is the ninth-largest producer of liquefied natural gas in the world
- Brunei's economy is vulnerable to fluctuations in the price of oil
Brunei's economy is almost entirely dependent on oil and gas exports
Brunei is the third-largest oil producer in Southeast Asia, producing about 180,000 barrels per day. It is also the ninth-largest producer of liquefied natural gas in the world. The country's oil and gas fields produce approximately 127,000 barrels of oil per day and 243,000 barrels of oil equivalent of natural gas per day. Brunei Shell Petroleum (BSP), a joint venture between the Brunei Government and the Royal Dutch/Shell group, is the chief oil and gas production company in the country. It also operates the country's only refinery.
The discovery of petroleum resources in the 1920s shifted the focus of the economy away from agriculture, fishing, and forestry, which had previously been the mainstays. The government has been trying to diversify the economy away from oil and gas, with limited success. In the 1970s, the government invested increasing revenues from petroleum exports, which allowed it to build its foreign reserves and invest in the future. However, since 1986, petroleum revenues have decreased, and government spending has increased, resulting in a budget deficit. The economy is now more vulnerable to fluctuations in petroleum prices.
Brunei's proven oil and gas reserves are expected to last until at least 2035. The country is looking to increase oil production in the coming years, with new extraction technology and favourable market prices making it economically viable to extract oil from mature fields and venture into deep waters.
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Brunei has one of the highest per capita incomes in Asia
Brunei is a small and wealthy country with one of the highest per capita incomes in Asia. The country's economy is a mix of foreign and domestic entrepreneurship, government regulation, welfare measures, and village traditions. The main source of its wealth is its exports of crude oil and natural gas, which account for over half of its GDP. The country is the third-largest oil producer in Southeast Asia and the ninth-largest producer of liquefied natural gas globally.
The high per capita GDP in Brunei is due to both domestic production and substantial income from overseas investment. The government also provides all medical services and subsidises food and housing, which contributes to the high per capita income. Additionally, the government has been working to diversify the economy away from oil and gas, although these industries still account for most of the country's economic activity.
In the 1970s, the Bruneian government invested the increasing revenues from petroleum exports while maintaining low and constant government spending. This allowed them to build substantial foreign reserves, which they invested internationally to provide for future generations. However, since 1986, petroleum revenues have decreased, and government spending has increased, resulting in a budget deficit since 1988.
Despite these economic challenges, Brunei has continued to encourage foreign investment and diversify its economy. The country offers tax exemptions for new enterprises that meet certain criteria and actively promotes the development of local industries. These factors, combined with its strong petroleum sector, contribute to Brunei's high per capita income in Asia.
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Brunei is the third-largest oil producer in Southeast Asia
The country's economy is almost entirely dependent on the export of crude oil and natural gas, with revenues from the petroleum sector accounting for over half of its GDP. The petroleum industry, including the manufacture of liquefied natural gas, generates more than half of Brunei's GDP, although it employs a very small portion of the labour force.
Brunei's oil production peaked in 1979 at over 240,000 barrels per day. Since then, it has been deliberately cut back to extend the life of oil reserves and improve recovery rates. Petroleum production currently averages 200,000 barrels per day.
Brunei Shell Petroleum (BSP) is the chief oil and gas production company in Brunei. It also operates the country's only refinery, which has a distillation capacity of 10,000 barrels per day—enough to satisfy domestic demand for most petroleum products.
The country's substantial foreign reserves are managed by the Brunei Investment Agency (BIA), which aims to increase the real value of the country's foreign reserves while pursuing a diverse investment strategy.
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Brunei is the ninth-largest producer of liquefied natural gas in the world
Brunei is a small but wealthy country with a stable economy that has been dominated by the oil and gas industry for the past 80 years. The country's economy is a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village traditions. Hydrocarbon resources account for over 90% of its exports and more than 50% of its Gross Domestic Product (GDP).
Brunei is the fourth-largest oil producer in Southeast Asia, averaging about 180,000 barrels per day. It is also the ninth-largest producer of liquefied natural gas in the world. Almost all of Brunei's natural gas is liquefied at the Brunei Liquefied Natural Gas (LNG) plant, which is one of the largest LNG plants in the world. The LNG plant is located in Lumut, Belait District, and has been a key player in the country's energy sector since its establishment in 1969.
The LNG plant is operated by Brunei LNG Sdn Bhd, a joint venture involving Mitsubishi Corporation, the Royal Dutch Shell Group, and the Bruneian government. Natural gas sourced from offshore reservoirs owned by Brunei Shell Petroleum is refined at the LNG plant and transported to Japan and South Korea. The LNG plant has five LNG trains and produces 6.71 million tonnes of liquefied natural gas every year.
Brunei's proven oil and gas reserves are expected to last until at least 2035. However, there is a growing awareness in the country of depleting natural resources and the need to diversify the economy away from its over-reliance on the oil and gas industry. The government has been taking steps to attract more foreign investment and develop other sectors such as agriculture, fisheries, and banking.
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Brunei's economy is vulnerable to fluctuations in the price of oil
Brunei's economy is heavily dependent on its hydrocarbon resource wealth, which provides more than half of the nation's income. The government has expressed concerns about the country's oil dependence, which makes it vulnerable to economic shocks. Indeed, since 1986, petroleum revenues have decreased, and government spending has increased, resulting in a budget deficit since 1988. This disappearance of a revenue surplus has made Brunei's economy more susceptible to fluctuations in petroleum prices.
The impact of these fluctuations is evident when examining Brunei's gross domestic product (GDP) over time. In the 1970s, petroleum price increases led to a peak GDP of $5.7 billion in 1980. However, a combination of sharply lower world market prices and voluntary production cuts caused a decline, with GDP falling by almost 30% in 1986. While GDP recovered to some extent in the following years, it never reached the 1980 peak.
The Asian financial crisis in 1997 and 1998, coupled with fluctuations in oil prices, created further uncertainty and instability in Brunei's economy. More recently, in 2015, declining oil prices and a drop in production due to maintenance and repair work resulted in another budget deficit for the country.
To address its vulnerability to oil price fluctuations, Brunei has attempted to diversify its economy away from hydrocarbons since the late 20th century. The government has introduced policies and initiatives to develop sectors such as agriculture, fisheries, tourism, and financial services. However, these efforts have not yet led to a significant reduction in the country's dependence on oil and gas.
In 2021, the government released a new blueprint for economic growth, emphasizing diversification away from oil. This blueprint targets five priority sectors for growth: downstream oil and gas, food, tourism, information and communications technology (ICT), and services. While the non-oil and gas private sector has shown some growth, the government aims to enhance it further by encouraging Bruneian-owned businesses to drive growth through collaboration and exploration of new market opportunities.
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Frequently asked questions
Brunei is a small and wealthy country with one of the highest per capita incomes in Asia. The country's economy is almost entirely supported by exports of crude oil and natural gas, with revenues from the petroleum sector accounting for over half of its GDP.
The vast majority of Brunei's wealth comes from its petroleum and natural gas industries. The country has vast reserves of both resources and is the third-largest oil producer in Southeast Asia and the ninth-largest producer of liquefied natural gas in the world.
Brunei's wealth has allowed the state to provide its citizens with a high standard of living, including free medical services and subsidised food and housing. However, there is a significant wealth gap within the country, with some citizens struggling to make ends meet despite the country's overall wealth.
Brunei's economy is vulnerable to fluctuations in the price of petroleum, and the government has recognised the need to diversify away from oil and gas. Since the late 20th century, Brunei has been working to develop other sectors, such as agriculture, fisheries, tourism, and financial services.