Brunei’s 420,000 residents are Southeast Asia’s biggest polluters despite contributing just 0.025 per cent of global greenhouse gas emissions in 2018. The hefty carbon footprint is due to the sultanate’s complete dependence on hydrocarbons for its domestic energy requirements. Gas powers 98.95 per cent of its electricity needs. Oil takes up one per cent, while a 1.2 megawatt (MW) demonstration solar plant – currently Brunei’s only source of renewable energy – supplies 0.05 per cent.
This is unlikely to budge much in the coming years. Throughout its chairmanship of the Association of Southeast Asian Nations (Asean) this year, the sultanate repeatedly called for a larger role for natural gas in the region’s energy transition effort, noting that it is “one of the cleanest fossil fuel options”, efficient, and accessible. Geographical constraints—i.e., its small size—mean that the technical potential for renewable energy is limited leaving the country to rely on nascent, unproven, technology to drive down its emissions.
“The challenge is going to be how Brunei – and how other governments, companies, countries – will allocate the cash from oil and gas [to reducing carbon emissions] over the next decade,” said Andrew Harwood, research director for Asia Pacific Upstream Oil & Gas at global energy consultancy and research group Wood Mackenzie.
Fortunes tied to fossil fuel
The economy with a gross domestic product (GDP) per capita of US$31,400 – the region’s second highest after Singapore, which has a GDP per capita of around US$60,000 – derives its wealth from exporting oil and gas. The industry accounts for 55 per cent of its economy and up to 90 per cent of its exports and government revenues.
Despite global efforts to shift away from oil and gas energy, the sultanate continues to strengthen upstream oil and gas activities to ensure long-term energy security and sustainability of its reserves. Brunei has the fourth largest proven reserves of gas in Southeast Asia, after Indonesia, Malaysia and Vietnam.
Demand for oil and gas is likely to be strong through the next decade as larger economies try to extract themselves from extracting fossil fuels. At current prices, significant cash flows will be generated for oil and gas producers like Brunei.
Oil and gas is a pillar of its economy and Brunei is determined to ramp-up the energy sector’s contribution to its GDP to US$31 billion in 2035 from US$7.43 billion in 2010. It also wants oil and gas sales to account for 90 per cent of the energy sector’s contribution to GDP by 2035, under an oil price assumption of US$120-145 per barrel.
Brunei is looking to attract investments of about US$60 billion in the sector for the development of enhanced oil recovery (EOR) technologies that will maximise oil reserves and extend the life of fields. Brunei estimates production in its fields could rise 10-20 per cent with EOR and encourages operators to deploy technologies for it. It is also looking for cash to develop small and marginal fields; new downstream industries; local energy goods and service industries and renewable energy.
Harwood is optimistic funds will come in for Brunei’s oil and gas, as energy giants Petronas, Shell, and Total continue to operate in the country. “[They] all still have major stakes in the producing blocks or in undeveloped resources within the country, and so you can expect those companies to be looking at how they can develop those resources,” he said. Brunei Shell Petroleum (BSP), a joint venture between the Dutch giant and the sultanate, contributes 90 per cent to the country’s oil and gas revenues.
Bet on tech
Brunei is banking on technology to reduce its emissions without cutting into its mainstay economy. Investing in pollution-reducing technology buys the industry time for its transition towards sustainable energy sources, say analysts.
However, instead of ramping up renewables, the petrostate’s decarbonisation policy appears to be largely reliant on energy efficiency targeting a 45 per cent reduction in energy intensity by 2035, from a baseline year, 2005 in line with its regional commitment to the Asia-Pacific Economic Corporation.
“To ensure that you can continue producing, in a sustainable manner, your existing oil and gas resources, you need to look at how you reduce your emissions for now. You need to look at how you can decarbonise that and that gives you more time with which to build up some of these alternative sources of energy,” Harwood said.
Efficiency will be achieved through mandating carbon reporting for industries, implementing a usage-based electricity tariff scheme, energy-efficient appliances, LED streetlights and electric vehicles. However, no policies are in place to support sustainable transport plans, according to the International Renewable Energy Agency (IRENA).
As pressure ramps up on Asian countries to reduce greenhouse gas emissions, Brunei could invest in technologies that reduce flaring – the controlled burning of natural gas, which releases air pollutants – and venting – the direct release of methane to the atmosphere, according to Harwood.
Around 0.3 billion cubic metres of gas flaring was observed around Brunei in 2016, with offshore accounting almost 70 per cent of the total, according to a 2019 report by the National Oceanic and Atmospheric Administration (NOAA), an American scientific and regulatory agency.
Technology to enable the sequestration of carbon will require the right regulatory framework, Harwood added. “It’s [carbon capture] going to be a longer-term liability because that carbon is stored underground…. It may also require government support for the development of large carbon capture hubs or industrial hubs so that they can begin to consolidate carbon and use some of the reservoirs to store that,” he observed.
Given Brunei’s gas reserves and existing infrastructure, hydrogen presents an opportunity for the country to reduce its reliance on fossil energy. ERIA places Brunei’s total hydrogen production potential as “relatively large” at 2.75 mega tonnes of oil equivalent.
“[Brunei] has LNG infrastructure so it has the source of gas that can be used for hydrogen production. If it can invest in carbon capture and storage technology, then it can produce that hydrogen in a clean manner,” Harwood said, adding that it can leverage trade relationships for this.
Japan, a proponent of hydrogen as an energy source, is Brunei’s biggest market for LNG according to the International Energy Agency. A hydrogen project undertaken by the two countries saw Brunei producing hydrogen from the liquefaction process of natural gas and shipping this to Japan using toluene, a crude oil component that allows the transport of hydrogen at ambient temperature and pressure. It was used in power generation. The project, which ended last year, was the world’s first demonstration of international hydrogen transport operations.
Hydrogen emits only water when burned. When taken from natural gas through steam reforming, it is widely considered carbon neutral if the carbon generated is captured and stored. However, available technology cannot capture all the carbon produced. Methane is also emitted in the process.
Gas remains on the table
Azhar Yahya, interim managing director of Petroleum Authority of Brunei Darussalam acknowledged that renewables will be the endgame for the energy sector at the Asean Energy Business Forum (AEBF) in September.
The government plans to introduce a renewable energy policy and regulatory frameworks that will stimulate public and private sector investment in developing and deploying renewable energy, according to country’s energy ministry.
Nevertheless, Brunei’s renewable energy policy is as modest as its hydrocarbon strategy is ambitious. Clean energy policies in the sultanate are given lower priority, with government bodies that have limited resources and muscle to make sizeable changes.
It aims to raise the share of solar power in the energy mix to 10 per cent and its share in power generation to 30 per cent by 2035. There are plans to expand the lone solar power plant to 4.2 MW, as well as to install two more that will add a combined 45 MW over the next five years. These projects are separate from the PV systems being set up by industry players to power their own requirements.
Malaysia has also been negotiating a power supply agreement with Brunei that would potentially see the hydroelectric dams in the Malaysian state of Sarawak supplying electricity to the sultanate. Should this succeed, it would be a way for Brunei to indirectly increase the contribution of renewables to its energy mix.
The Asean bloc had set a regional target of raising the share of renewables to 23 per cent of the regional energy mix by 2025. But the Asean Centre for Energy has noted that if member states work to achieve their own national targets for energy efficiency, renewable energy and climate change without accounting for regional targets, Asean will only be able to meet the goal by 2040.
Dr Mat Suny Md Hussein, Brunei’s energy minister, said in his remarks at the AEBF that natural gas would allow the region to meet an anticipated rise in energy demand post-pandemic while also lowering emissions.
In September this year, the regional grouping adopted the Bandar Seri Begawan Joint Declaration on Energy Security and Transition, which champions the use of natural gas along with renewable energy as a “pragmatic approach” in the transition towards lower-emission energy.
The declaration, which recognises that “unique and diverse energy systems” of member states would mean “different possible national paths to achieve access to affordable, reliable, sustainable and modern energy for all”, gives Brunei some elbow room in the Asean energy transition effort.
