Dato Hamdillah H A Wahab Executive Director Brunei LNG Sendirian Berhad

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1 Dato Hamdillah H A Wahab Executive Director Brunei LNG Sendirian Berhad Dato Hamdilla h H A Waha b is a Chemical Engineering Graduate o McGill f University in Montreal, worked as Research Assistant in Pulp & Paper Research Institute McGill, University in ; Plant Technologist in shel U.K.Stanlo l w Refinery in ; Technical Advisor in Shell International (SIPM) Head Office and Plant Manager of Shell Perni s Refinery in Rotterdam, Holland in He is a member of Management Team of Brunei Shell Group of Companies and is Executive Director of Brunei LNG. He also serves a Director in the Board of Brunei Shell Fund Sendiria s n Berhad, Brunei Shell Petroleum Co and Brunei Shell Tanker Sendiria s n Berhad. He is a member of th Belait e Municipal Board, is a Government advisor t Ketua o Kampong o f Lunut Village under the Ministry of Home Affairs since 1994 and member o St.Margaret f School Board of Governors since Hamdillah was awarded the honorary title Most Blessed Order o Seti a f Negara Brunei (SNB) in 1994 and conferred the title of Darjah Ser i Paduk a Mahkota Brunei Yang Amat Mulia Darja h Kedua (DPMB) by His Majesty The Sultan and Yan Di g Pertuan Brunei in He was a member APEC Pacific Business Forum (PBF) in and is a Brunei member in APEC Business Advisory Council (ABAC) in In 1998, he becomes member of Brunei Ministerial Economic Council. In 2000, he is nominated as Brunei Chairman of APEC 2000 SME Business Forum as well as APEC 2000 CEO Summit. Page 1 of 8

2 GASEX' 2000 Pattaya, Thailand Country Paper Brunei Darussalam Presented by Dato Paduk a Hj Hamdillah B Hj Abd Wahab Brunei LNG Executive Director Prepared by: Othman Hj Hassan Brunei LNG Sendirian Berhad Page 2 of 8

3 1: Summary Brunei Darussalam is in a crossroad for sustainable growth in the oil and gas industry. Brunei Darussalam Economic Counsel, BDEC, which was established in July 1998 has completed her report and recommended amongst others to key the foundation for sustainable growth by expanding and improving competitiveness in the oil and gas industry whilst diversifying the economy. Whilst reviewing the existing relatively small domestic supply and demand of natural gas. This paper focus in the gas industry development articulates the growth aspiration and reviews the country s ambition to develop her downstream industry covered in the downstream master plan. 2: Introduction Brunei Darussalam is a pioneer in the Asia Pacific LNG industry supplying LNG for more than 25 years since 1972 to Japan and since 1994 to Korea. The ideal position of Brunei Darussalam on the north side of Borneo enables Brunei LNG to position itself competitively amongst other existing players and new entrants and have proven itself as one of the most reliable suppliers of LNG. The oil and gas industry remains an important contributor to national economic development providing more than 90% of the country s national exports. It is also the second largest employer after the public sector. The gas industry in Brunei Darussalam is dominated by a few players in the upstream and downstream. It is supported by local and international service providers. The Brunei Darussalam natural gas chain stretches from the Brunei Shell Petroleum and the Block B joint venture facilities delivering more than 30 million cubic meters per day to the Brunei LNG liquefaction plant at Lumut to liquefy 6.7 million tonnes of LNG. A total of seven dedicated 75,000 m3 (B-class) carriers and one 125,000m3 vessel are used to deliver LNG to customers in Japan and Korea. Proven Natural Gas reserves are sufficient to meet current contractual commitment and remain at the same level when the LNG plant started operation in Page 3 of 8

4 3: Regulatory Framework Brunei is the first country in Asia to export gas as LNG. Gas and oil are a significant export earner for Brunei. As a major stakeholder, Brunei government established Brunei Oil and Gas Authority (BOGA) in January 1993 to provide advice and recommendations to His Majesty The Sultan and Yan Dipertua g n Negara Brunei Darussalam on all matters relating to oil, gas and products. The Authority has been mandated with the following functions: 1) The planning and control of every phase of activities with regard to the development of petroleum products taking into account the needs for conservation of these primary resources and the environment. 2) The award of petroleum mining concessions and contracts and matters related thereto. 3) To submit to HM The Sultan and Yan Di g Pertuan of Brunei Darussalam, advice and recommendations relating to the control and protection of investment in the petroleum industry within the State. Communications pertaining to oil and gas matters are directed to the Petroleum Unit, a department under the Office of the Prime Minister, which acts as the Secretariat to BOGA. The Director of the Petroleum Unit is the Secretary to the Authority and acts as its chief executive officer and spokesman. 4: Gas Industry Development As with other ASEAN member countries, Brunei Darussalam is not insulated against from the effects of the region economic downturn. The low crude oil prices did not helped to stimulate the economy either. In response to this, the Brunei Darussalam Economic Council was formed in 1998 to provide recommendation to jumpstart the economy in the short-term and to review opportunities for long term sustainable growth. In establishing the foundation for sustainable growth the Council recommends expanding and improving competitiveness in oil and gas industry. The following initiatives were established; Page 4 of 8

5 Maximising production within the limits permitted by Brunei Darussalam's flexible Oil Conservation Policy Invest in the expansion of Liquefied Natural Gas (LNG) production. Level the competitive playing field by reviewing access to existing oil and gas infrastructure. Improve efficiency in exploration by improving access to available seismic and exploration data on open and relinquished areas. Improve incentives to promote the development of areas straddling different operators/concessions. Establish a national oil company in accordance to strict guidelines in performance standards and corporate governance as a vehicle for oil and gas related ventures. Explore oil and gas related opportunities in Brunei Darussalam and abroad based on prudent financial assessment and Brunei Darussalam's comparative advantage. 4.1: Growth Aspirations In response to the BDEC recommendation, Brunei LNG is positioning itself towards maximising utilisation of the BLNG existing production facilities and continuing the LNG sales beyond 2013 and expansion of the existing 7.2 mtpa facilities. The concept for extension and expansion outlined in the BLNG Asset Reference Plan approved by the BLNG Board consists of three main driver ; s Continuing LNG market growth in the Asia Pacific region. Meeting the aspiration of the nation on expanding and improving the level of competitiveness in the domestic oil and gas industry. Maximise value creation of the existing assets. At the outset, upgrading of existing facilities will be completed by 2001 and thereafter 7.2 Mtpa maximising production capacity is assured. Long-term growth scenario includes extending BLNG s current operation beyond 2013 and the addition of new capacity to support LNG sales above the existing level. The expansion plan envisaged a new-world class liquefaction train of 4.0 m/tonnes per annum capacity to be up and running by the year 2008 Page 5 of 8

6 when the first window of opportunity for additional capacity emerges. The plan also identified a total of 11.5 tcf of gas will be required to meet for the extension and expansion scenario. It is likely that such reserves will be sourced from existing concession areas and new areas to be opened up for exploration. Consistent with the aspiration of BLNG expansion and extension plan, the Brunei Government will commence its tender process for two unexplored blocks in Brunei territorial waters and also onshore areas. The Petroleum Unit has recently awarded a contract for a 10,000 sq KM 3D seismic survey. This work will be completed in Q A conference on the Open Areas will be held on October 9 th, 2000 in Brunei Darussalam where prospective bidders will be able to learn the scope and the terms and conditions of participation. Brunei Darussalam Concession Map 4.2: Downstream Master Plan The second growth potential for the gas industry is t e usage h of gas for downstream industries as fuel feedstock. The Government of His Majesty The Sultan and Yang Di- Pertuan of Brunei Darussalam, through the Petroleum Unit, Prime Minister's Department (the 'PU') is presently undertaking a masterplan study on the development of an oil and gas downstream industry. The study is expected to produce an economically viable stage by stage Page 6 of 8 S A

7 'road map' for the future development of downstream oil and gas industry with the possible integration of a petrochemical complex and export oriented refinery. Further the road map' will form the basis for future decisions by the Government of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam in its endeavour to develop petrochemical industries/refinery in Brunei Darussalam. In addition to this, th Masterplan e will also be a tool for attracting local and foreign investments into the development of the downstream oil and gas industries. In this regard, 0.5 Tcf of gas reserve has been allocated for the purpose of development. 4.3: Power Generation Efficiency Five main powe r generation centre in Brunei Darussalam with the exception of the Lumut Co-generation power facilities are running in single gas turbines. A study was undertaken jointly between the Department of Electrical Services, the Petroleum Unit, Brunei Shell Petroleum and Brunei LNG to review the long-term fuel for power generation requirements. The study concluded substantial fuel saving could be made by installation of more efficient combined cycle units for additional power requirement. Th Gadong e 11 power plant presently which running on single cycle has a provision for conversion to combined cycle in the future. 4.4: Environmental Management Responsible actions on environmental matters continue to b a major e objective for the oil and gas industries operating in Brunei Darussalam. On 4 th July 2000, Brunei LNG has been certified to the ISO standard for Environmental Management System. The certification to ISO requirements is only the beginning of th BLNG's e journey to conserve the environment. Brunei LNG became the first Shell invested liquefaction facilities to obtain such accreditation. Page 7 of 8

8 5: Domestic Natural Gas Supply and Demand Domestic gas for power generation has grown steadily in the recent years as a direct result of the development of light and medium industries, completion of new government office buildings and the successful Government housing resettlement scheme for its citizens. The present peak demand of about 378 MW is forecasted to increase in the short term at a 1 annual rate of between 7% and 10%. n Gas consumption for domestic uses is not significant when compared to gas required for power generation and feed gas requirement for the LNG plant. In the eastern part of the country, gas is distributed by means bottled LPG which is used mainly for cooking and heating. The western part of the country, where oil and gas industry is located, has the benefit of a well-developed gas grid system. The gas distribution system is owned and operated by the Public Works Department. Hosted b y: Bangkok RAI : 226/25 Bond Stree Riviera t Tower 3, Muan g Thani, Chaengwattana Nonthaburi, Thailand Tel: (+662) , , Fax: (+662) gasex@bkkrai.co m, http: / /gasex Managed by: Page 8 of 8