Oil Surge Fuels Brunei’s Economic Revival – But Is It Sustainable?

October 3, 2024:

Brunei’s economy soared by 6% in Q2 2024, driven by a booming oil and gas sector. However, with global energy markets in turmoil and the nation's heavy reliance on oil, can this growth be sustained? As non-oil sectors struggle to keep pace, what does the future hold for Brunei’s economy—and its people? MHO

 

By Malai Hassan Othman

 

BANDAR SERI BEGAWAN, OCTOBER 2024: Brunei Darussalam’s economy saw significant growth in the second quarter of 2024, marking a recovery fueled largely by its oil and gas sector.

 

The country’s Gross Domestic Product (GDP) rose by 6.0% year-on-year, reaching BND 5.2 billion compared to BND 4.8 billion in the same quarter of 2023.

 

This growth, while promising, raises critical questions about its sustainability and whether the benefits will extend beyond the oil and gas industry to other sectors and the lives of ordinary Bruneians.

 

Oil and Gas: The Backbone of Growth

Brunei’s oil and gas sector continues to be the foundation of the economy, contributing over 50% of the total GDP.

 

The sector grew by 7.7% in Q2 2024, driven by increased production of crude oil and liquefied natural gas (LNG).

 

Crude oil production rose from 77.9 thousand barrels per day in 2023 to 81.0 thousand barrels per day in 2024, while LNG production jumped from 586.9 to 656.3 thousand Million British Thermal Units per day (MMBtu/d).

 

Despite global LNG prices softening, oil prices for Brunei surged by 6%, largely due to geopolitical instability in the Middle East and Europe.

 

This has helped cushion Brunei from global market fluctuations, but it highlights a familiar narrative - an economy heavily reliant on external factors, particularly energy prices.

 

Beyond Oil: Modest Non-Oil Sector Growth

While the oil and gas industry thrives, Brunei's non-oil sector also recorded a positive, albeit modest, 4.5% growth.

 

Leading this charge was the manufacturing of petroleum and chemical products, which saw a remarkable 52.8% increase.

 

However, other non-oil industries, such as agriculture, forestry, and fisheries, experienced downturns, with the fisheries sector shrinking by a staggering 16.7%.

 

Brunei’s move to diversify its economy is reflected in its growing downstream activities and manufacturing capacity, yet these figures reveal how fragile this growth can be.

 

The country’s long-term economic health depends on balancing its oil revenues with more sustainable, broad-based growth from sectors like technology, manufacturing, and services.

 

Mixed Results in Industry and Services

The industrial sector experienced mixed fortunes, with LNG production boosting growth by 9.7%.

 

Gains in apparel manufacturing and electricity generation contributed positively; however, some manufacturing sectors, such as food and beverages, experienced a decline during the same period.

 

The services sector showed a slight 1.3% improvement, with transportation, business services, and healthcare seeing growth.

 

However, declines in the finance and restaurant industries offset some of these gains. These variations suggest that Brunei’s broader economy is still struggling to find solid footing outside of oil and gas.

 

Is Growth Reaching Everyone?

Despite positive GDP numbers, public commentary suggests doubts about how much this growth is felt on the ground.

 

Concerns have been raised about the sustainability of this oil-driven boom and whether it will translate into job creation and improved living standards for ordinary Bruneians.

 

For instance, some have noted a lack of improvement in retail, and unemployment remains a challenge.

 

Public sentiment also questions the heavy reliance on oil sales and whether it truly reflects broader economic health.

 

“If it’s from oil sales, then there’s nothing to be proud of,” commented one observer, hinting at the deeper structural weaknesses that may be masked by high GDP growth.

 

The Road Ahead: What Happens After the Boom?

As Brunei looks to the remainder of 2024 and beyond, the key question is: Can the current momentum be sustained?

 

Major projects like the Hengyi petrochemical plant, slated for completion in 2028, and the expansion of Brunei Muara Port by 2025 are critical to supporting future growth.

 

However, these projects remain tied to the oil and gas sector, signalling the need for diversification into other areas to safeguard the economy from potential shocks.

 

In addition, while Brunei’s oil reserves - at 1.1 billion barrels - could last 188 years at current consumption levels, reliance on this finite resource carries inherent risks.

 

As the global energy landscape transitions towards renewables, Brunei faces a ticking clock to adapt.

 
Conclusion: A Boom with Caution

Brunei’s economic growth in Q2 2024 is certainly worth celebrating. The 6% increase in GDP, largely powered by oil and gas, showcases the nation’s resilience and potential for further gains.

However, the lingering question is how sustainable this growth will be in the long run.

 

Will Brunei’s economy evolve beyond its dependence on oil, or will it remain vulnerable to external price shocks and market dynamics?

 

The Sultanate must navigate this complex terrain carefully, ensuring that the benefits of growth are felt more broadly across sectors and the population.

 

Only then can Brunei build a more resilient and inclusive future, one that isn’t just defined by oil booms but by sustainable, diversified prosperity. (MHO/10/2024)