What happens when an industry that built a nation's wealth starts to wither away? As Brunei's oil production declines and the world shifts toward renewable energy, can the nation’s economic lifeblood evolve, or will it remain trapped in the past? The future of Brunei's oil and gas industry hangs in the balance – and so does the future of its economy.
By Malai Hassan Othman
BRUNEI DARUSSALAM, JANUARY 2025: Brunei Shell Petroleum (BSP) has long been recognised for its operational excellence and efficient management of the nation's oil and gas assets, forming a cornerstone of Brunei’s wealth for decades.
Despite its world-class operations and commitment to safety, Brunei’s oil sector now faces a significant challenge: as crude oil production continues to decline, can it evolve quickly enough to maintain its crucial role in the national economy?
In 2023, Brunei’s crude oil production fell to just 93,000 barrels per day, down from a peak of 221,000 barrels per day in 2006.
By early 2024, production had slipped further, averaging around 73,000 barrels per day.
These figures underscore a broader issue — one that poses a serious threat to the future of Brunei's oil and gas sector and the economy dependent on it.
The Challenge of Adapting to Change
Brunei’s oil and gas sector, once central to its economic prosperity, now faces an urgent need to optimise operations and adapt to the rapidly evolving global energy landscape.
With much of the country’s revenue still tied to oil, Brunei has struggled to diversify its economy and remains heavily reliant on a sector that is showing signs of exhaustion.
A significant factor in this challenge is the sector's resistance to change.
While other global oil producers have diversified their portfolios and embraced new technologies, Brunei’s oil industry continues to invest heavily in traditional practices, such as external training programs and consultancy services, without fully implementing the advanced technologies that could enhance efficiency and extend the lifespan of existing reserves.
The International Energy Agency (IEA) stresses, “Countries reliant on fossil fuels must transition to cleaner energy sources to ensure long-term sustainability and meet global climate goals.”
This transition involves adopting cleaner technologies, which Brunei's oil sector has been slow to integrate. Without this shift, the sector risks falling behind.
BSP’s Strong Foundations Amidst Industry Challenges
Despite the challenges, BSP's long-standing reputation for operational efficiency remains a valuable asset.
The company has upheld high operational standards; however, the global energy market is shifting, impacting oil prices and production dynamics.
Brunei’s oil sector must adapt to this new reality to remain competitive.
His Majesty Sultan Haji Hassanal Bolkiah has repeatedly emphasised the need for strong leadership and transparency within the oil and gas sector.
His calls for modernisation are crucial, yet the pace of change has been slow.
Experts agree that without a commitment to embracing innovation, the sector may continue to struggle.
In 2024, TotalEnergies decided to divest its assets in Brunei, selling them to Malaysia’s Hibiscus Petroleum for $259 million.
This move reflects growing concerns among foreign investors about Brunei’s oil sector, driven by stagnating production levels, lack of diversification, and limited innovation.
According to the BP Statistical Review of World Energy, “The shift from fossil fuels to renewable energy is accelerating globally, and nations heavily dependent on oil must diversify to secure long-term economic stability.”
Opportunities for Transformation
While Brunei's oil production has been on a downward trend, an increase in oil prices presents a glimmer of hope.
The second quarter of 2024 saw oil prices average $88.89 per barrel, up from $83.90 in the previous year.
This price increase offers an opportunity for Brunei’s oil sector, but swift action is needed to capitalise on these market conditions.
Industry experts emphasise the importance of adopting a diversified energy strategy.
For Brunei to continue thriving, they suggest integrating new technologies, improving resource management, and investing in renewable energy sources to ensure long-term resilience.
This transformation requires not only an operational overhaul but also diversification into renewable energy for long-term sustainability.
A Dead Horse: Time for Change
The concept of the Dead Horse offersTheory serves as a powerful metaphor for the current situation, illustrating the futility of persisting with ineffective strategies, much like riding a dead horse.
Brunei’s oil sector appears to be in a similar predicament, clinging to outdated practices without embracing the necessary changes.
It is time for the industry to recognise that continuing down the same path while blaming external factors is not a viable solution.
Innovation and modernization are no longer optional; they are essential for survival.
Without a strategic shift toward diversification and sustainability, the sector will continue to deplete resources and delay critical reforms.
Looking Ahead: A Call for Action
Brunei stands at a critical turning point. The oil sector, once a pillar of prosperity, now requires urgent transformation to secure a future beyond oil.
The time for action is now. The decisions made today will determine whether Brunei can successfully navigate the global energy shift, ensuring a sustainable and diversified economy for future generations.
The oil and gas sector must evolve - adopting innovation, modernising operations, and diversifying the energy mix.
This is not merely about preserving the oil industry but about creating a resilient, future-proof economy that is not overly reliant on a single resource. (MHO/01/2025)
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