Brunei Darussalam, a small and wealthy country, has a population of approximately 443,593 people as of July 2017. The country's economy is a mix of foreign and domestic entrepreneurship, government regulation, welfare measures, and village traditions. Brunei's economy is heavily reliant on crude oil and natural gas, which account for about 65% of its GDP and 95% of its exports. The country is the third-largest oil producer in Southeast Asia and the ninth-largest producer of liquefied natural gas globally. While the government has made efforts to diversify the economy, oil and gas still dominate economic activities. Brunei's population is well-educated and largely English-speaking, and the country boasts excellent infrastructure. The government provides free medical services and education through the university level.
What You'll Learn
Crude oil and natural gas production
Brunei'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 country is the world's 22nd-largest producer of natural gas, and the third-largest oil producer in Southeast Asia. Brunei's oil production peaked in 1979 at over 240,000 barrels per day and has since been deliberately cut back to extend the life of oil reserves and improve recovery rates. Petroleum production currently averages some 200,000 barrels per day, with Japan, South Korea, Taiwan, and the countries of ASEAN being the major customers. Brunei is also the ninth-largest producer of liquefied natural gas in the world, with almost all of its natural gas being liquefied at the Brunei Liquefied Natural Gas (LNG) plant, which is one of the largest LNG plants in the world. Over 82% of Brunei's LNG produced is sold to Japan under a long-term agreement.
The largest producers of natural gas in Brunei are Shell, TotalEnergies, and Brunei National Petroleum Co. Shell was the largest producer of natural gas in 2022, with output down by 16% compared to 2021. TotalEnergies was the second-largest producer, with output down by 20%, and Brunei National Petroleum Co was third with a decrease of 20% on the previous year. There are four natural gas-producing fields in Brunei, all located offshore in the South China Sea.
Brunei Shell Petroleum (BSP), a joint venture owned in equal shares by the Brunei Government and the Royal Dutch/Shell group of companies, is the chief oil and gas production company in Brunei. It also operates the country's only refinery, which satisfies domestic demand for most petroleum products. The French oil company Elf Aquitaine entered the petroleum exploration market in Brunei in the 1980s, discovering commercially exploitable quantities of oil and gas in three of the four wells drilled since 1987.
In recent years, Brunei has experienced disruptions in oil and gas production due to the COVID-19 pandemic and has seen a decline in output. The country is banking on new discoveries to reverse this decline, with the energy minister, Mat Suny bin Mohd Hussein, announcing plans to drill several more exploration wells offshore. Brunei's government has set ambitious targets for domestic oil and gas production, aiming to reach 350,000 barrels of oil equivalent per day (boe/d) by 2025 and 650,000 boe/d by 2035. These targets will be challenging to achieve, as the country's oil and gas industry faces uncertainties due to the decline of the Champion field, headwinds from the COVID-19 pandemic, limited prospectivity of open blocks, rising costs, and slowing FDI inflows.
To support the industry, the government has been undertaking various oil and gas pipeline projects and contracts to expand production capacities and sustain their position in the market. Additionally, Brunei's oil and gas market is expected to grow due to recovering prices, strong demand from the transportation industry, and modern developments in exploration and production activities. The country's future consumption of oil and gas will also increase due to its strong economy, population growth, and continued reliance on petroleum-based products.
Obtaining a Brunei Work Visa: A Guide for Indians
You may want to see also
Economic diversification
Brunei's economy is almost entirely dependent on its exports of crude oil and natural gas, which account for over half of its GDP. However, the country has been trying to diversify its economy and reduce its reliance on the petroleum sector. The government has recognised the need to develop other sectors and reduce dependence on food imports, and has made efforts to do so since the late 20th century.
Brunei's leaders are concerned that increased integration into the world economy could undermine internal social cohesion. The country's small population and high per capita GDP are supported by substantial income from overseas investment, which supplements income from domestic production. The government provides all medical services and subsidises food and housing.
The government has shown progress in its basic policy of diversifying the economy away from oil and gas. In the 1990s, non-oil and gas activities accounted for 64% of GDP, compared to only 24.3% in 1991. The government has allocated over $7.2 billion for the implementation of various projects and programmes in its current Seventh National Development Plan (1996-2000).
Agriculture, fishing, and forestry, once the mainstays of Brunei's economy, now account for a tiny fraction of GDP and employ a small segment of the workforce. The government has implemented programmes to stimulate local fisheries, and by the early 21st century, Brunei had become self-sufficient in poultry and egg production and was approaching self-sufficiency in vegetables.
To preserve its abundant forest cover, Brunei enacted legislation in the late 20th century to restrict logging. Plantation programs have been implemented to provide enough sawn wood for the local market, but timber is not exported.
Other sectors that the government is focusing on include tourism and financial services. Brunei is also one of the largest consumers of fish per capita in the world, and overfishing has become a growing concern. Aquaculture has been encouraged in carefully selected areas to promote sustainable development.
A Guide to Ordering from Amazon: Shipping to Brunei
You may want to see also
Foreign investment
Brunei has an open economy that is favourable to foreign trade and foreign direct investment (FDI). The country is actively encouraging more foreign investment, with new enterprises that meet certain criteria receiving pioneer status and being exempt from income tax for up to five years. The Brunei Economic Development Board (BEDB), under the Ministry of Finance and Economy, is the government's frontline agency for promoting and facilitating foreign investment.
Brunei has amended its laws to make it easier and quicker for entrepreneurs and investors to establish businesses. The Business License Act (Amendment) of 2016 exempts several business activities from needing to obtain a business license. The Miscellaneous License Act (Amendment) of 2015 reduced the wait times for new business registrants to start operations, with low-risk businesses like eateries and shops able to start operating immediately.
There are no restrictions on foreign ownership of companies incorporated in Brunei. The Companies Act requires locally incorporated companies to have at least one resident of Brunei as a director, but companies may request exceptions. The corporate income tax rate is the same for both locally and foreign-owned companies. All businesses in Brunei must be registered with the Registry of Companies and Business Names at the Ministry of Finance and Economy. Foreign investors can fully own incorporated companies, foreign company branches, or representative offices, but not sole proprietorships or partnerships.
Brunei is a member of the Association of Southeast Asian Nations (ASEAN), which has Free Trade Agreements (FTAs) with Australia, New Zealand, China, India, and South Korea, and a Comprehensive Economic Partnership Agreement with Japan. Brunei also has Bilateral Investment Treaties with Bahrain, China, Germany, India, the Republic of Korea, Kuwait, Oman, and Ukraine.
The country's stable political climate, good telecommunications and airline connections, business tax credits, and lack of income, sales, or export taxes make it a welcoming climate for potential investors. Sectors offering business opportunities include aerospace and defence, agribusiness, construction, petrochemicals, energy and mining, environmental technologies, food processing and packaging, franchising, health technologies, information and communication, digital finance, and services.
Brunei's Orchids: A Natural Wonder
You may want to see also
Government spending
In the 1970s, Brunei invested its sharply increasing revenues from petroleum exports while maintaining a low and constant rate of government spending. This allowed the government to build its foreign reserves and invest them globally to secure the future. However, since 1986, petroleum revenues have decreased while government spending has increased, resulting in budget deficits. The disappearance of revenue surplus has made Brunei's economy more vulnerable to fluctuations in petroleum prices.
Brunei's gross domestic product (GDP) soared with the petroleum price increases in the 1970s, reaching a peak of $5.7 billion in 1980. However, it declined in subsequent years, falling by almost 30% in 1986 due to a combination of lower petroleum prices and voluntary production cuts. While GDP recovered to some extent, it did not reach the 1980 peak. The Asian financial crisis, fluctuations in oil prices, and the collapse of Amedeo Development Corporation, Brunei's largest construction firm, led to economic instability and a mild recession.
In recent years, Brunei has continued to face economic challenges. From 2015 to 2017, the country experienced its third consecutive year of economic recession due to declining oil prices and reduced production for maintenance and repairs. The government has recognized the need for economic diversification and has made it a priority in its national development agenda. While efforts to promote non-oil and gas activities have had some success, the economy is still heavily reliant on the petroleum industry.
The government's economic diversification efforts include developing sectors such as agriculture, fisheries, tourism, and financial services. By the early 21st century, Brunei had made significant progress in self-sufficiency for poultry, eggs, and vegetables. Additionally, the government has invested in the Hengyi petrochemicals plant expansion and the Brunei Muara port capacity-raising project, scheduled for completion in 2029 and 2025, respectively. These projects are expected to support GDP growth and oil output.
Dentist's Guide to Practicing in Brunei: Requirements and More
You may want to see also
Exports
Brunei'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. In 2022, the country exported a total of US$14 billion worth of goods, making it the 90th largest exporter in the world.
The top exports from Brunei are refined petroleum, petroleum gas, crude petroleum, cyclic hydrocarbons, and nitrogenous fertilizers. In 2022, the country exported US$4.94 billion worth of refined petroleum, US$3.99 billion worth of petroleum gas, US$2.1 billion worth of crude petroleum, US$1.98 billion worth of cyclic hydrocarbons, and US$241 million worth of nitrogenous fertilizers.
The main destinations for Brunei's exports are Australia, Japan, China, Singapore, and Malaysia. In 2022, exports to Australia were worth US$2.66 billion, to Japan US$2.32 billion, to China US$2.19 billion, to Singapore US$1.97 billion, and to Malaysia US$1.37 billion.
In addition to its petroleum exports, Brunei also exports a range of other products, including organic chemicals, industrial machinery, precision instruments, chemical products, and iron and steel articles. The country also has a high level of specialization in the export of cyclic hydrocarbons, petroleum gas, acyclic alcohols, refined petroleum, and nitrogenous fertilizers.
The government of Brunei has been working to diversify the economy away from oil and gas, with some success. The country's non-petroleum industries include agriculture, forestry, fishing, and banking.
Malaysians' Perceptions of Brunei: A Cultural Perspective
You may want to see also
Frequently asked questions
The population of Brunei was estimated to be 357,800 in 2004, with 186,200 males and 171,600 females.
The main economic activities in Brunei are crude oil and natural gas production, which account for approximately 65% of GDP and 95% of exports.
The per capita GDP of Brunei is among the highest in the world.
Other economic activities in Brunei include agriculture, forestry, fishing, and banking. The government is also trying to diversify the economy into areas such as information and communications technology and halal manufacturing.
The unemployment rate in Brunei was reported to be 5.5% in 1999.