BANDAR SERI BEGAWAN – Brunei’s crude oil production plunged to a record low in the third quarter of 2021 as the second COVID wave took a toll on the economy, which shrank for the fourth consecutive quarter.
The Brunei economy sunk deeper into recession after posting a negative growth of 2.2 percent in Q3 2021, according to the Department of Economic Planning and Statistics’ latest GDP report that was released last weekend.
With declining revenue in the first three quarters of 2021, the sultanate was expected to end the year on a low note.
The last time Brunei suffered a long economic downturn was in 2016 when oil prices crashed to an 11-year low of $34.62 a barrel.
Data showed the oil and gas sector contracting 5.3 percent in Q3 2021, owing to the lowest quarterly oil output of 97,100 barrels a day. The previous record was set in Q2 2018 at 97,600 barrels a day.
The hydrocarbon sector had experienced production disruptions following hundreds of COVID-19 cases detected at the Champion 7 offshore oil field in August last year.
“Limited onsite workforce as a result of COVID-19 reduced the ability to recover from unscheduled deferment and delayed well, reservoir and facility management activities,” DEPS said in a press statement.
However, the energy sector has been in negative territory since Q1 2020 — before the pandemic hit Brunei.
The reduced oil production came at a time when oil prices continued to rise due to increased demand.
DEPS said the average oil price jumped 68 per cent to US$75.18 a barrel in Q3 2021.
Brunei’s liquefied natural gas output also scaled down from 834,500 million British thermal units per day (MMBtu/d) in Q3 2020 to 750,900 MMBtu/d in the same period last year.
“LNG production declined due to limited gas supply and maintenance activities at one of the LNG plant facilities,” DEPS said.
Adding to the woes of the energy sector, natural gas production decreased to 28.5 million cubic metres a day in Q3 2021, compared to 30.7 million cubic metres a day in Q3 2020.
More losses in downstream sector
The poor economic performance in Q3 2021 was further exacerbated by revenue losses in the downstream oil and gas sector, which fell one percent year-on-year.
Since petrochemical company Hengyi Industries began operations in the final quarter of 2019, Brunei has been relying on the downstream sector to offset losses in the energy sector over the past two years.
Downstream activities were the largest driver of Brunei’s economic growth in 2020, with the manufacturing of petrochemicals soaring 323.9 percent.
However, the downstream sector’s positive momentum ended in the second quarter of 2021, though no reason was given for the dip in earnings.
Services industry maintains modest recovery
Despite businesses ordered to shut or work from home amid the second COVID wave, the services sector defied gloomy expectations to post a modest 1.1 percent growth.
The services industry expanded for the third straight quarter in 2021 after reporting dwindling revenue in all four quarters of 2020.
The air transport industry made the largest gains in Q3 2021, jumping 84.5 percent to maintain its positive growth from the previous quarter.
Other industries in positive territory were finance (9%), communication (6.1%), and other transport services (4%).
Conversely, seven sub-sectors in the services sector were badly hit by COVID restrictions, including wholesale and retail trade, water transport and restaurants.
The services sector contributed to 36.8 percent of Brunei’s GDP in Q3.
Another bright spot in Brunei’s struggling economy was the agriculture, fishery and forestry sector, climbing 27.9 percent in the third quarter.
DEPS attributed the growth to the increase in production of vegetables and fruits (48.1%), fishery (34%), livestock and poultry (19.4%), as well as forestry (12%).
The agriculture, fishery and forestry sector only accounted for 1.4 percent of the Q3 GDP.