Brunei to Build Second Crude Oil Refinery with Shell

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Researched by Industrial Info Resources (Sugar Land, Texas)--Brunei, one of the wealthiest oil-rich countries in southeast Asia, will develop a second crude oil refinery. The refinery will be located in the newly developed Pulau Muara Besar (PMB) port region. Brunei TRC Energy Bhd (PetroBru) has received approval from the government to go ahead with the detailed feasibility study. The state-of-the art refining complex will have a capacity to refine 200,000 barrels per day (BBL/d). The complex will also have a storage facility of 1 million cubic meters to 2 million cubic meters. The refinery will process and store diesel and jet fuel. Brunei Shell Petroleum operates the country's existing refinery. This joint venture between the government of Brunei and Royal Dutch Shell (NYSE:RDS.A) (The Hague, The Netherlands) has a refining capacity of 10,000 BBL/d.

TRC Energy of Malaysia, which holds a 26% stake in PetroBru, completed an initial feasibility study and submitted the report to the government in March 2008. According to the study, conducted by the global mining and energy consulting firm Wood Mckenzie for PetroBru, the Asia Pacific region alone accounts for 30% of the global oil products consumption. Brunei, therefore, has potential to set up an export-oriented-unit refinery to meet its current and future domestic demand. An export-oriented-unit refinery would also be a viable option to tap overseas markets. The refinery is estimated to cost $3 billion-$4 billion. But sources now say that the capital expenditure may increase because of the rise in steel prices globally.

PetroBru will now conduct a detailed study that will encompass technical, economical and environmental aspects of the project in association with Foster Wheeler (NASDAQ:FWLT) (Clinton, New Jersey), a major engineering, procurement and construction (EPC) contractor, and Drewry Shipping Consultants (London), a leader in logistics management. The detailed feasibility study will take up to eight months, and the actual EPC project that will begin after the approval of the feasibility study report will take up to one year. PetroBru plans to start construction by 2010 and estimates the refinery to start contributing revenues in five years. Many international oil corporations and countries, including China, Iran and Kuwait, have expressed interest in investing in the refinery project.

The sultan and the government of Brunei have been working toward opening Brunei's doors to foreign investments for a while. The PMB deepwater port has been one step in this direction. The government hopes to attract foreign investments and accelerate economic growth. The refinery, which takes up 194 hectares of land on the 971-hectare PMB port, is considered to be strategically located with easy access to China, Vietnam and the Middle East. Construction of the refinery will also provide for associated development, including roads, housing, retail and, most importantly, employment. The government hopes to create at least 3,000 jobs at the refinery complex. According to a report by the World Trade Organization last year, Brunei was fourth in the list of top oil producers in southeast Asia. Japan, China, South Korea, India, Australia, United States and New Zealand are some of its buyers. The country ranked ninth in the export of liquefied natural gas. Brunei's major liquefied-natural-gas customers include Japan and South Korea, which account for 95% of exports, as well as the United States and Spain.

Though exports of crude oil and natural gas account for almost 50% of the country's gross domestic product, Brunei has to import more than 50% of its consumption of petroleum products. This is because the country is lacking in refining capacity. The development of the refinery at the PMB port is expected to decrease Brunei's reliance on petroleum imports and to increase its export potential.

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