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News Release
BANDAR SERI BEGAWAN, Oct
30 - The government of Brunei is looking at options for a big investment
in the downstream oil and gas sector as part of an economic
diversification strategy aimed at broadening its industrial base.
In an interview to be
broadcast by Radio Television Brunei (RTB) on Monday, Pehin Yahya Abu
Bakar, Permanent Secretary in the Prime Minister's Office, said a
government masterplan had identified oil refining, petrochemicals and
energy-intensive industries like aluminium smelting as the most
promising options. Detailed studies are now underway and a decision is
expected by the end of the year.
Among the three options,
Pehin Yahya said an export-oriented refinery would be integrated with
other downstream industries if it went ahead. The government is also
considering production of natural-gas based petrochemicals such as
ammonia, urea and methanol as well as a possible aluminium smelter, he
said.
All of the projects being
considered will produce job opportunities and export income, creating
further industries as a spin-off.
Oil and gas currently
account for more than half of Brunei's economic activity and about 80
percent of its exports. Ninety-five percent of the crude oil produced is
exported while the rest is processed for domestic use at an existing
refinery owned by Brunei Shell Petroleum Co. Sdn. Bhd. About 90 percent
of the gas is converted to Liquefied Natural Gas (LNG) for export. The
rest is used to generate electricity and for domestic use.
"We need to broaden
the industrial base," Pehin Yahya said, noting that the Brunei
Darussalam Economic Council (BDEC) had already identified four symptoms
of the unsustainable nature of the local economy -- income that lags
population growth, a chronic budget deficit, rising unemployment and a
weak private sector.
"So the master plan
study that we're doing now will provide road maps to help to relieve
some of these problems," he said. "We hope that the industries
identified by this study will help to create more jobs, more spin-offs
in terms of creating more industries downstream and also perhaps get rid
of some of the budget deficit."
Abdul Latif Abdul Rahman,
Head of Downstream Industry at the Petroleum Unit, said some of the
spin-off industries being considered for development included plastics,
textiles, packaging materials, synthetic rubber and also agricultural
chemicals and pharmaceuticals.
"We hope to pave the
way for the development of small and medium enterprises in Brunei
Darussalam and also the setting up of service industries," Mr.
Abdul Latif said. "There's also the possible development of common
infrastructure and utilities that can be utilised by other
industries."
As part of the
masterplan, Mr. Abdul Latif said a comprehensive market study on the
viability of an export-oriented refinery examined possible crude
supplies and demand for petroleum products as well as modern refinery
technologies.
"From the result of
the comprehensive simulations that we did, imported Middle East crude
show better margins compared to our local Brunei crudes," he said,
adding that local crudes fetched premium prices due to their low sulphur
content.
"So it makes sense
that we continue exporting these Brunei crudes and import Middle East
crudes for our feedstock for this refinery being considered."
Ian Williams, an
Australian consultant who is Project Director of the Brunei Darussalam
Masterplan Study on Downstream Oil and Gas Industry, said there were
four main challenges to identifying new industries.
"We had to adopt the
study methods that ensured we studied all the possible chemicals that
should be looked at. The next thing was to adopt a configuration that
gave a high value added but that didn't overtax the country's resources.
"The third challenge
would probably be the balance between value added and flexibility. We
had to choose the right range of products that gave us flexibility
within the producing complex but also produced a high valued
added," he said.
"The last challenge
was coming to accept that a refinery based on imported crude - and, in
fact, while Brunei continued to export its own crude - had a better
economic potential than refining Brunei's own crude."
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