Without new resources, diversification ismore imperative

SHIFTING away from oil and gas becomes more urgent if Brunei Darussalam fails to tap into offshore resources, an economist yesterday said.

"If Brunei had access to the deep offshore area then the diversification process would not be so urgent," said Dr Roger Lawrey, deputy dean of the Faculty of Business, Economics and Policy Studies at Universiti Brunei Darussalam.

Finding oil in deep waters off Brunei could be difficult though because of territorial disputes with neighbouring countries.

During the interview, Lawrey didn't specify any dispute involving the sultanate, but it is generally known that Brunei and Malaysia have conflicting claims over offshore and deepwater seabeds believed to be rich in oil and gas.

The Brunei Times had reported that in 2003, exploration work in two oil blocks awarded by the Brunei government to Shell and Total along the Borneo coast was halted after an exploration vessel was chased away by Malaysian patrol boats.

"If it is not resolved, then the time when the oil and gas has a smaller contribution to the economy becomes closer," Lawrey told The Brunei Times.

He said that Brunei faces the challenge of dealing with shrinking non-renewable resources, an increasing population and a weak private sector.

"In Brunei you got two variables. One is you got the oil and gas, which is a non-renewable resource and will make a smaller contribution to the economy over time. At the same time that is happening, population growth is increasing," he said.

With the territorial dispute restricting access to deep offshore areas, Brunei Shell Petroleum (BSP) is working on increasing recovery rates from established deposits, he said.

"Within the existing fields, there is only a certain percentage of oil you can get out easily. When you've got that oil out, you would need to start using more sophisticated techniques to get the oil out called tertiary recovery that is what BSP is doing," Lawrey said.

Assuming oil production of 100 barrels per day, he said, with the current situation, only 25 barrels can be extracted easily, while the rest of the 75 barrels would need to be extracted using more advanced technologies, which can be costlier.

"They are working on the existing fields using smart field technology and snake wells to increase the recovery rates of existing shallow water fields. It would increase costs," he said.

Eventually, he said, the increase in costs would make production closer to being "uneconomic", particularly, if access to deep offshore reserves continues to be restricted.

According to the Oxford Business Group report on Brunei last year, the oil and gas sector contributes 66.6 per cent to Brunei's gross domestic product (GDP), while accounting for 90 per cent of government revenues.

In the future, Lawrey said the oil and gas sector would make a smaller contribution to the economy, adversely affecting the nation's GDP per capita amid increasing population.

"If we don't stimulate the diversification process and look into the future, with what we have at the moment, we can foresee GDP per capita going down, unless we do something." The Brunei Times