OIL IN BRUNEI
Reduced to a fraction of its former size and wealth under the British, Brunei saw a revival of its fortunes when oil was discovered in 1929. The resulting wealth was judiciously managed and sustained, even during the nation’s occupation by the Japanese during WWII.
Exploration for oil had begun as early as 1911 at Labi and Bukit Puan, then shifted to Tutong in 1923, until final success at Seria in 1929. The discovery of oil came like manna from heaven, assuring the sultanate with a future as the wealthiest country in the world, for its size. Gradually, government revenues began to rise, then escalate rapidly. For a decade or more, surpluses were being built because the speed of growth exceeded the ability to administer controlled spending. The once impoverished sultanate became a net lender to the government of the Straits Settlements in the 1930s.
Brunei Darussalam’s vast reserves of petroleum and gas have fueled the nation’s economy since the 1930s. Since oil was discovered the Brunei monarchy has largely sat back and let Royal Dutch/Shell extract the oil and natural gas while the sultanate picked up the royalty checks. The development of offshore oil fields in the 1960s and the rise in oil prices in the 1970s turned Brunei into one of the world’s richest places.
Looking for Oil in Brunei
In Brunei, an oil seepage was reported in the late 19th century. It was at Ayer Bekunci near Kampung Kasat. In 1899, exploration started with the first recorded well drilled close to Brunei town, now known as Bandar Seri Begawan. The drilling went down as deep as 850 feet but unfortunately no oil was discovered. But still enthusiasm was high and six companies were involved in the oil search including Royal Dutch Shell, which started operations in 1913 after discovering the Miri field in Sarawak, Malaysia. By 1918- all other companies had pulled out except Royal Ducth Shell, which continued to search and found some accumulation of oil and gas in Labi, Belait in 1924. The find was too small to be commercialised.
Rozan Yunos wrote in the Brunei Times, “The story of the discovery of oil in Brunei’s oil town, Seria has often been told even in school text books but no body remembers how difficult it was to find oil in Brunei Darussalam at the beginning. When we look at the approximately 200,000 barrels of oil that our nation produced daily and the billions of revenues that we get from the sale of oil and gas, it is a wonder that it was ever found in the first place. By the early 20th century, Brunei, once a powerful regional thalassocracy (maritime power) had become a poor country. Brunei had lost almost all of its territories and was confined to the current tiny area in the vast Borneo Island. It needed something of a miracle and it found it when oil was discovered in Brunei and in particular in abundance where Brunei is currently. [Source: Rozan Yunos, Brunei Times, May 12, 2007 ]
“Oil had been more or less expected to be found in the North West Borneo area. By the mid 19th century, seepages have been reported in a number of places and oil prospectors have come in droves flooding in to Borneo and into Brunei all hoping to be the lucky person to find that oil. Oil prospectors tried drilling in a number of places. In Labuan, a hole was actually drilled there as early as 1866. In Brunei, an oil seepage was reported in the late 19th century. It was at a place called Ayer Bekunci near Kampung Kasat which is around the Sungai Kebun area in Kampong Ayer and just across the Brunei River from the capital, Bandar Seri Begawan, then known as Pekan Brunei. A well was drilled for the first time in Brunei in 1899. The drilling went down as deep as 850 feet but unfortunately no oil was discovered. After that attempt, interest in finding oil in Brunei waned.
“But that all changed when in 1910, oil was discovered in the neighbouring district of Sarawak, Miri. That renewed the flagging interest of discovering oil in Brunei Darussalam. In 1911, a geological survey for Brunei was conducted by the British Borneo Petroleum Syndicate Limited. A number of other companies were also given oil prospecting and mining rights to find oil in Brunei Darussalam. The British Borneo Petroleum Syndicate Limited was given 169 square miles in the Belait District. The Shanghai Langkat Company from Singapore was given a small area in Jerudong. The Nederland Koloniale Petroleum Maatschappij, a Dutch Company in the Belait District, The Anglo Saxon Petroleum Company Limited in the Tutong District and Asiatic Petroleum Company (Federated Malay States) Limited was also given rights. The latter two are Shell Group companies.
All the companies mined between 1912 to 1923 and between all of them, in those 12 years, they only had one ‘oilshow’ (the character or traces of oil showing or present) but all the other oil wells in all the districts were dry. As a result most of them abandoned their operations with the exception of Shell. It bought the Petroleum Syndicate’s rights and from 1923 onwards, Shell began serious exploration works in the Belait District. Belait District, being the area adjoining the Miri District in Sarawak looked to be quite promising to Shell as it had already produced oil commercially there. However Shell did not have that much success in the beginning. In Labi, the British Malayan Petroleum Company (BMP), the Shell company drilled a few oil wells and one produced oil even though the amount was not of commercial quantities. Another produced gas at high pressure.
Discovery of Oil in Brunei
In 1925, the search shifted to the Seria, Belait coastal strip in the west of the state. In 1929, the first commercial find was made at Seria, Belait by the British Malayan Petroleum Company, owned by Royal Dutch Shell, which was the forerunner to the present Brunei Shell Petroleum Company Sdn Bhd (BSP). Rozan Yunos wrote in the Brunei Times, “It wasn’t until 1926 before the search for oil began in earnest in Seria. The story oft been told regarding the discovery was that a Mr. F.F. Mariott, then BMP’s Field Superintendent in Labi and and a Mr. T.G. Cochrane (later Lord Cochrane), then the General Manager of Sarawak Oilfields Limited, another Shell company were on the way towards Kuala Belait from Miri. They stopped at Kuala Balai, then considered as the capital of the Belait District and used two bicycles to visit a geophysicist in the Lumut area. [Source: Rozan Yunos, Brunei Times, May 12, 2007 ]
“It was a relatively long journey and they stopped at Padang Berawa, near Sungai Seria to rest. That was when Cochrane smelled oil and told the geophysicist to suggest the survey further south to Padang Berawa. At that time Padang Berawa (wild pigeon’s field) was unknown and was described as a swamp and the conditions in that area was terrible. However a number of gas seepages were reported and when analysed at Shell Headquarters in Holland indicated that it was methane and ethane gas indicating the possibility of oil gas. A detailed survey was conducted and coreholes were drilled. The first proper oil well named S-1 was drilled in July 1928 near the beach and struck oil and gas at 974 feet when it began flowing. And the rest is history.
“Padang Berawa as a name disappeared from the records and Seria named after Sungai Seria became the new name for the newly created town. It took quite a while before Seria was established. In the early days, all equipment had to ferried in. The first buildings were relatively primitive. It wasn’t until 1938 that the road connecting Kuala Belait and Seria was completed. Before that, one had to drive along the beach and wait for the tides to go out. It was the same from Seria to the capital. It wasn’t until the early 1960s that the road from Kuala Belait to Bandar Seri Begawan (then Pekan Brunei) was finally connected.
“As a side note, it is interesting to note that the company name ‘Shell’ was not visible in all the early Shell companies that operated in Brunei. The discovery of oil in Seria was made by a Shell company called Sarawak Oilfields Limited and the oil production was operated by another Shell company called British Malayan Petroleum Company Limited. The Brunei Shell Petroleum Company Limited did not operate until 1957.”
Brunei After the Discovery of Oil
Rozan Yunos wrote in the Brunei Times, “It took a couple of years before oil became the main export of Brunei. The year of 1930, the year after the oil was discovered but has not yet contributed much to the Brunei economy, was probably the last year that Brunei had to worry about its finances. Its fortune was about to change but changes in administration and management were starting to be seen. "The Annual Report for the State of Brunei 1930" was prepared by the British Resident, PAB McKerron. His name still lived on in Kuala Belait with one of the streets there named after him. His Highness Sultan Ahmed Tajudin Akhazul Khairi Waddin ibni Al-Marhum Sultan Mohamed Jamalul Alam was then the Sultan. He was 17 at that time and Duli Pengiran Bendahara and Duli Pengiran Pemancha were appointed as joint regents. [Source: Rozan Yunos, Brunei Times, May 16, 2011 ]
“Economically, things were not good for Brunei. The prices of rubber and other raw materials forming the bulk of exports from Brunei continued to fall. It was the time of the Great Depression which originated with the fall in stock prices in USA on September 4 the previous year. International trade plunged by more than 50 per cent; and unemployment in USA rose to 25 per cent with most other countries experiencing more than a third of their labour forces unemployed.
“The Brunei Annual Report indicated that local Chinese firms could not pay for their imports. The locals had to sell their silver dollars which they had accumulated the years when rubber prices were good. However in spite of all these, Brunei's trade values increased from $2.7 million in 1929 to $3.3 million in 1930. This was due to the rapid development now taking place in the Belait District. The effect of the discovery of that oil in 1929 has begun to show up in Brunei.
“The 1930 revenue was much lower compared to the previous four years. Brunei owed $401,000 in public debt in 1930, the majority of which is debt to the Straits Settlement Government. Brunei was still active in agriculture. With the rubber prices down, farmers focused on sago which had been badly neglected since rubber planting began. In 1930, more than 6,000 pikuls were produced compared to 3,000 pikuls the previous year. But by the end of the year, the sago prices too had fallen so low that it hardly paid to export it. Rice was grown in a much larger area, 7,500 acres compared to 5,200 acres the year before. However production of rice using the dry method was severely affected by a severe drought but increased yields using the wet method compensated for the loss. The Brunei farmers were now convinced of using the wet method over the previous traditional dry cultivation.
“In the oil industry, several excellent producing wells were completed in 1930. The year also saw a very thorough investigation of the field. A grid of access roads had been commenced and a steel pile bridge constructed over the Seria River to ensure good communications with the company's headquarters in Kuala Belait. The roads in Kuala Belait and Seria were taken over by the British Malayan Petroleum Company. A pontoon car-ferry was established at Kuala Tutong to allow traffic between Brunei and Kuala Belait. Many development followed suit. There were many new store godowns, offices and quarters for the employees being constructed. A pipe line water supply was also being looked at.
“Unfortunately the Great Depression of 1930s also had an effect on the overall development of the oil industry. The overall world oil was in excess production because of the poor global demand. If it was not for this, Brunei's oil would have been exported by the following year. However despite the pessimisms of the oil industry, development continued albeit slower in the oil fields of Seria. Despite the mixed signs, development in 1930 was the beginning of a period of good years for Brunei.
Offshore Oil and Natural Gas Found in Brunei
For a long time, the onshore Seria oil field was Brunei Darussalam’s only producing field despite some 48 exploration wells being drilled between 1914 and 1960. A breakthrough came in the 1960s when technological advances made offshore exploration feasible and the South West Ampa field was discovered in 1963, thirteen kilometres off Kuala Belait.
It was the discovery of the South West Ampa gas field, which sparked plans for the Brunei LNG plant project. The Brunei LNG plant began its operation in 1972 as one of the world’s first large scale liquefied natural gas (LNG) plant on the coast of Brunei Darussalam. Setting new standards in engineering technology, Brunei LNG proved that large quantities of gas could be liquefied safely and shipped over long distances becoming a model for similar ventures throughout the world. The LNG plant began operation in 1972. In 1973 Deep Water Port opened in Muara to accommodate large LNG ships. In 1973 the world's largest LNG plant officiallly opened.
A major discovery was found in the Fairley field which is close to Ampa and in 1970, Champion was discovered about 70 kilometres north-east of Seria. Two more oilfields were discovered namely the Magpie which was found in 1975 and Rasau in 1979. These new oilfields increased the production to 250,000 barrels per day at that time.
A milestone was achieved in 1991 when the Seria field produced its billionth barrel and a monument was built near the original site of Well No. 1 to mark the achievement. The Billionth Barrel Monument was officially opened by His Majesty Sultan Haji Hassanal Bolkiah Mu'izzaddin Waddaulah, Sultan dan Yang Di-Pertuan Negara Brunei Darussalam on 18 July 1991.
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Vanity Fair magazine, Brunei Tourism, Prime Minister's Office, Brunei Darussalam, Government of Brunei Darussalam, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.
Last updated June 2015