BANDAR SERI BEGAWAN – Brunei Shell Petroleum signed a commercial agreement with Hengyi Industries on Wednesday to supply crude oil to the new US$3.4 billion Hengyi refinery on Pulau Muara Besar.

The Hengyi refinery is the largest foreign direct investment project in the sultanate, processing 175,000 barrels of oil per day for export to China and other regional markets. The refinery entered a trial operation phase back in May and is expected to be fully operational this quarter.

Brunei Shell Marketing also signed an agreement with the Chinese petrochemical giant to distribute refined fuel products to the domestic market.

BSP’s commercial director, Farida Talib, said the agreements between the three companies would meet domestic demand for petroleum products, while also supporting the development of Brunei’s downstream industry.

“By extending the value chain and domestic footprint of the energy sector, [we are] creating as much in-country value as possible,” she said before the signing ceremony at the Empire Hotel & Country Club.

“[This] takes Brunei Darussalam’s energy industry a huge step forward towards diversifying its energy sector and export product mix, while creating a presence in global products market following an already established crude marketing reputation.”

The Hengyi refinery is expected to contribute $1.3 billion to GDP in 2020 — a much-needed boost to Brunei’s economy — while also establishing the country’s presence in the global refinery market.

With the first phase of the 276 hectare project complete, Hengyi has also committed a further US$12 billion for development of the second phase, which will focus on manufacturing downstream products such as aromatics and industrial chemicals that are used to make clothing and plastics, potentially generating up to US$10 billion of revenue per annum, according to Hengyi.

Slated for completion by 2022, the second phase of the project will also increase refining capacity from eight million to 22 million tonnes.

Hengyi owns 70 percent of shares in the project, while Damai Holdings — a subsidiary under the Ministry of Finance and Economy’s Strategic Development Capital Fund — owns the remaining 30 percent.