Brunei is a showcase in the $3 trillion global oil market.
The Southeast Asian country’s amber crudes are valued by refineries for their clarity and low sulfur content. A premium fuel like SLEB (Seria Light Export Blend) is sold in small quantities but generally costs more than Brent crude, the industry benchmark.
Yet even Asia’s high-quality crudes were not immune to wild swings in the energy market in March and April, in response to the blockade of the Strait of Hormuz.
The prices of “light sweet” crude from Brunei are indexed to that of Malaysian Mat, a regional benchmark. In April, the Tapis price was hovering slightly above $100 a barrel, while cheaper Brent crude hit an 18-year high of $141 in the spot market.
The market for light sweets “has experienced a decline,” notes a report from the Organization of the Petroleum Exporting Countries.
Price volatility, coupled with a global fuel crisis, has triggered a surge in orders for light crude oil. Brunei exported 105,000 barrels per day in April, the highest level in five years, according to Kpler, a Brussels-based data company that tracks commodity flows. The Star, a Malaysian newspaper, called Brunei an energy “winner” in the Persian Gulf conflict.
Nearly 70 percent of Brunei’s oil exports in April were shipped to Thailand. Refineries benefited from rising prices for premium crude even as Bangkok officials struggled to source supplies from the United States and Brazil to ease the country’s fuel shortage. Thailand is heavily dependent on Middle Eastern oil, with 50% of its imports passing through the Strait of Hormuz.
“We are of course advocating for diversification,” said Kaja Kallas, during a visit to Brunei in April. The EU foreign policy chief co-chaired the biennial meeting of foreign ministers from the Association of Southeast Asian Nations (ASEAN) and the European Union (EU). She urged the region’s oil importers to reconsider their purchases of Russian crude amid an oil crisis, arguing that windfall profits could prolong Moscow’s war against Ukraine. The EU and ASEAN don’t always agree on this issue, but his argument on diversification may have resonated with representatives of the 11-member bloc.
Brunei is a regional pioneer in oil exploration. The first oil wells were discovered in the late 1800s, when the region was under British protectorate. In 1929, commercial drilling began on the Seria oil field, which produced one billion barrels of crude.
The Sultanate of Brunei Darussalam has much in common with the monarchies of the Persian Gulf, including large energy reserves, a popular royal family, and adherence to Islamic law. In early June, Sultan Hassanal Bolkiah appointed his 34-year-old son as foreign minister. Oil wealth is spread across a population the size of a small city: per capita GDP of around $36,000 is double that of neighboring Malaysia and comparable to Kuwait’s income.
Brunei’s oil production peaked at 221,000 barrels per day in 2006. “The upstream oil and gas sector – which accounts for 80 percent of total exports and government revenue – will continue to decline as offshore oil and gas fields mature in the coming decades,” wrote an economist at AMRO, an ASEAN-affiliated organization in Singapore.
A decade ago, some oil experts predicted the demise of Brunei’s oil industry. However, ASEAN’s smallest country currently appears more stable than some of its Persian Gulf peers. Australia is a reliable buyer of Seria lightweight blends. Thailand and Indonesia are growing markets, refining low-density crudes into products like aviation fuel.
On March 31, the global price of jet kerosene hit a record high of $240.50 in the Singapore spot market.
Brunei’s niche in light crude oil appears relatively secure.