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    Brunei Upstream Gas Production Forecast

    November 22, 2021 - Fitch Solutions Sector Intelligence


      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Brunei Upstream Gas Production Forecast

      • 19 Nov 2021
      • Brunei Darussalam
      • Oil & Gas

      Key View: Brunei's natural gas production is forecast to see incremental growth over the coming years, driven by growing domestic and regional demand for the fuel and the need to support LNG exports. As with crude oil, chronic declines across existing assets and limited scope for major new finds remain concerns, although joint development efforts with Malaysia in the deepwater offer limited upsides.

      Latest Updates
      • As with crude oil, natural gas production in Brunei continues to be affected by disruptions arising from Covid-19-related restrictions at home.
      • This, in addition to chronic declines across mature existing assets, has prevented the sector from performing at its full potential.
      • Output is shown to have fallen by more than 9% year-on-year through the first eight months of 2021, spilling over to arrest volumes available for LNG exports and hurting state revenues.
      • The plan to ease restrictions in phases over the coming months should prove beneficial for the sector, allowing oil and gas producers to restore workforces at production sites and as demand rebounds from across the region.
      • The heavy dependence on oil and gas export revenues, plus contracts in place with buyers, will ensure resources be spared to keep Brunei’s gas production afloat over the next decade, although scope for major growth appears limited.
      • There is limited upside risk from the deepwater, following the agreement signed with Malaysia in April 2021, to jointly develop the Gumusut-Kakap and Geronggong-Jagus East fields in the Malaysia-Brunei Commercial Arrangement Area (CAA); concrete details are still being ironed out.
      Structural Trends

      As with crude oil, Brunei's producing gas fields are mature. The country's gas production began in the early 1970s with the major shallow water South West Ampa gas field discovery, which transformed the country into an LNG producer and exporter from 1972. The field accounts for over half of gas reserves and production alone in Brunei, piping gas to the Brunei LNG plant in Lumut. There is also gas production at other oil and gas fields such as Champion.

      Sector Fast Maturing, Limited Upside From Deepwater
      Brunei - Gas Production (2019-2030)

      f = Fitch Solutions forecast. Source: JODI, Fitch Solutions

      Over the coming decade, we see the annual growth rate of production levelling off at an average of approximately 0.5% per annum. The government's aggressive upstream investment efforts are likely to yield better outcomes in supporting the growth in natural gas than crude oil, as domestic, regional demand for the fuel continues to expand. In addition, upstream investments will need to favour natural gas plays over those that focus on crude oil moving forward, due to the need to upkeep LNG exports to international buyers. Growth into the mid-2020s hinges on future LNG contract negotiations. The current crop of LNG contracts with buyers from Japan, Malaysia as well as Shell are due to expire in 2023, although Brunei still has not announced any renewals or signing of new agreements. Depending on market conditions, producers may choose to ramp up or limit production on a more ad hoc basis going forward.

      Deepwater Upside Risk, But Still Some Way Off

      There is upside risk to the forecasts from a potential project in the offshore CA1 and CA2 blocks (Kelidang cluster), which lie in the Malaysia-Brunei Commercial Arrangement Area (CAA) and are operated by Malaysia's Petronas. The unitisation agreement between Petronas and Brunei’s National Unitisation Secretariat (NUS) to jointly develop the area was signed in April 2021, paving the way forward for the two parties to negotiate over appropriate commercial terms. Future development efforts are likely to focus on the Gumusut-Kakap and Geronggong-Jagus East oilfields.

      Gas Production (Brunei Darussalam 2019-2024)
      Indicator 2019 2020 2021f 2022f 2023f 2024f
      Dry natural gas production, bcm 12.1 11.8 10.7 10.8 10.9 11.0
      Dry natural gas production, bcm, % y-o-y 1.7 -2.5 -9.0 1.0 0.5 0.5
      Dry natural gas production, % of domestic consumption 318.4 302.6 267.8 264.2 255.3 242.0
      f = Fitch Solutions forecast. Source: JODI, Fitch Solutions
      Gas Production (Brunei Darussalam 2025-2030)
      Indicator 2025f 2026f 2027f 2028f 2029f 2030f
      Dry natural gas production, bcm 11.0 11.1 11.1 11.2 11.2 11.3
      Dry natural gas production, bcm, % y-o-y 0.5 0.5 0.5 0.5 0.5 0.5
      Dry natural gas production, % of domestic consumption 238.5 237.3 236.1 235.0 233.8 232.6
      f = Fitch Solutions forecast. Source: JODI, Fitch Solutions
      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.


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