BANDAR SERI BEGAWAN — The Brunei economy slid deeper into recession after posting its largest quarterly contraction in three years amid persistent oil and gas production woes, government data showed.
The country’s gross domestic product (GDP) shrank 2.1 percent year-on-year in the second quarter of 2021 – its worst economic performance since Q2 2018 when crude oil production fell to a record low 97,600 barrels a day.
This is also the third consecutive quarter of GDP decline as the Department of Economic Planning and Statistics (DEPS) revised its previous figure of 1.4 percent to 0.8 percent negative growth in Q1 2021.
In its Q2 2021 GDP report released last week, DEPS attributed the contraction to lower output in the energy sector – a similar trend seen in the previous two quarters.
The hydrocarbon sector fell 4.7 percent in the second quarter this year, extending its negative growth since Q1 2020.
Crude oil production dropped from 118,300 barrels a day in Q2 2020 to 111,100 barrels day in Q2 2021, owing to a planned refinery shutdown for maintenance.
Brunei’s crude oil production has been on a declining trend since 2006, according to the think tank Centre for Strategic and Policy Studies.
Earlier this year, Energy Minister YB Dato Seri Setia Dr Hj Mat Suny Hj Md Hussein said the sultanate would develop marginal oil fields and venture into deepwater exploration to boost oil and gas output.
However, Brunei’s oil and gas sector may take a further hit in the third quarter this year as disruptions to production were expected following hundreds of COVID-19 cases detected at the Champion 7 offshore oil field in August.
The reduced oil output comes amid a 143.3 percent jump in oil prices.
On average, a barrel of oil cost US$69.67 in Q2 2021 as opposed to US$28.64 in the same period last year.
Natural gas output also scaled down to 31.5 million cubic metres a day in Q2 2021 compared to 34.3 million cubic metres a year ago.
Liquefied natural gas production further dwindled on the back of “limited gas supply and maintenance activities at one of the LNG plant facilities”, DEPS said.
The oil and gas sector accounted for 50.6 percent of the total gross value added in the second quarter of 2021.
Downstream sector ends positive growth
Earnings from the downstream sector tumbled 14.8 percent in Q2, ending its positive growth since petrochemical company Hengyi Industries began operations in the last quarter of 2019.
DEPS did not disclose the reason for the decrease in downstream activities.
In the same period last year, the downstream sector soared 481 percent on the back of Hengyi Industries’ strong showing.
Downstream activities were the largest driver of Brunei’s economic growth last year, with the manufacturing of petrochemicals climbing 323.9 percent.
The non-oil and gas sector, which includes downstream activities, expanded at a slower growth of 0.9 percent in the second quarter of 2021.
DEPS said retail sales had driven the growth of the non-oil and gas sector.
Services industry continues to expand
The services sector was one of the few bright spots in Brunei’s economy, rising 2.3 percent in Q2 to continue its positive growth from Q1.
Just three of the 16 sub-sectors in the services industry recorded revenue losses, a stark contrast to last year when 10 sub-sectors were reeling from the effects of the first COVID-19 wave.
The services sector was in negative territory in all four quarters of 2020 due to limited business activities from COVID-19 restrictions.
The hard-hit aviation sector recovered from a sharp fall to grow 55.4 percent in Q2 as flag carrier Royal Brunei Airlines has resumed more flights.
Big gains were also seen in the hotels (79.6%), restaurants (32.4%) and land transport (14.3%) sectors.
Exports of goods and services dropped 10.9 per cent, while imports surged 82.3 per cent.