BANDAR SERI BEGAWAN – Brunei is still struggling to get out of a deep recession after record-low oil production in the second quarter of 2022 triggered the biggest quarterly GDP decline of 4.4% in six years, government figures showed.
The hydrocarbon sector posted a steep contraction of 9.3% year-on-year in Q2 amid major disruptions to oil and gas production, according to the Department of Economic Planning and Statistics’ (DEPS) latest GDP report.
Crude oil output fell from 111,100 barrels a day to a record-low of 94,500 barrels a day, the second time in less than a year that production dipped below 100,000 barrels per day. Earlier in Q3 2021, oil output had plunged to 97,100 barrels a day following hundreds of COVID-19 cases detected at the Champion 7 offshore oil field.
Natural gas production also shrank from 31.5 million cubic metres a day in Q2 2021 to 27.3 million cubic metres a day in the same period this year, while LNG production declined from 852,700 million British thermal units a day (mmbtu/d) to 685,400 mmbtu/d.
DEPS attributed the lower oil and gas output to “unscheduled maintenance and rejuvenation activities”.
During a press briefing on Monday, Second Minister of Finance and Economy Dato Dr Hj Mohd Amin Liew Abdullah said maintenance of oil facilities was initially scheduled during the COVID-19 pandemic in 2021, but had to be postponed to this year.
“Once maintenance has been completed, we will see an increase in our GDP next year,” he said in response to a reporter’s question on Brunei’s post-COVID economic prospects.
Brunei’s crude oil production has been on a declining trend since 2006.
It was previously reported that a significant number of the country’s oil wells and platforms are ageing, which posed production challenges.
The reduced oil output comes at a time when average oil prices jumped 72.1% year-on-year to US$119.87 a barrel in Q2 2022.
Accounting for 56.4% of the Q2 2022 GDP, the upstream oil and gas sector has maintained its negative growth since the first quarter of 2020.
The sharp GDP contraction in Q2 2022 means that Brunei’s economic growth rate has been in negative territory for seven consecutive quarters.
It further casts doubts on growth projections as the sultanate had been predicted to end 2022 with modest gains.
The last time Brunei suffered a long economic downturn was in 2016 when oil prices crashed to US$34.62 a barrel.
Downstream sector sees major gains
While economy recovery remains elusive in the upstream oil and gas sector, downstream activities surged 32% year-on-year in Q2.
DEPS data showed that the non-oil and gas sector, which includes downstream oil and gas activities, rose 1% on the back of increased methanol and fertiliser production.
Methanol production climbed 20.5% from 136,921 metric tonnes in Q2 2021 to 164,926 metric tonnes in the same period this year.
Moreover, Brunei Fertilizer Industries began manufacturing ammonia and urea early this year, further contributing to the downstream sector’s robust growth.
The downstream oil and gas sector was expected to drive an economic rebound this year with projected growth of 30%.
Services sector ends positive growth
The services sector contracted 2.8% year-on-year, ending its positive growth for five straight quarters following the full reopening of the economy.
Revenue losses were reported in the finance sub-sector (-15.7%), wholesale and retail trade (-5.2%), government services (-4%) and restaurants (-2.1%).
The air transport sub-sector made the biggest gains in Q2, soaring 114.3% as COVID-19 travel restrictions were lifted.
Air arrivals rose from 1,261 to 33,067 year-on-year from April to June, while air departures grew from 7,617 to 37,687 over the same period.
Other bright spots in the Brunei economy were business services (9.9%), hotels (7.8%), communication (5.5%), land transport (4.8%) and real estate (2.3%).
DEPS said the communication sub-sector’s positive growth was buoyed by the rising number of internet and mobile phone subscribers, which increased 2.5% and 0.9 percent, respectively.
Meanwhile, the agriculture sector’s revenue dwindled for the first time in two years, falling 6.7% due to the sharp decrease in forestry activities (34.3%).
Exports of goods and services also fell 7.9% year-on-year, while imports expanded 8%.