With work set to start on a multi-billion dollar petrochemicals plant, Brunei Darussalam has moved a step closer to achieving its long-held objective of building up its downstream hydrocarbons sector.
On January 27, the Brunei Economic Development Board (BEDB) finalised an agreement with China’s Zhejiang Hengyi Group for the lease of a 260-ha block of land on the island of Pulau Muara Besar (PMB), which is being developed by the board as the Sultanate’s main hydrocarbons hub. The Chinese-backed corporation will be using the block to construct a multi-phase integrated oil refinery and aromatics cracker facility, with the first $4bn stage due to be operational in 2017.
The facility is intended to turn out a range of products when operational, with its planned 8m-tonne capacity split between refining crude oil, diesel, gasoline, jet kerosene, naphtha, benzene and paraxylene. When the facility’s second stage comes on-line, production will be expanded to include olefins, mainly used in plastics, and mono-ethylene glycol, widely used in fibres and for industrial purposes. While some of the petroleum products will be destined for the local market, most of the take from the refinery will be exported.
A promising start
According to Haji Abdul Manaf Metussin, the deputy permanent secretary at the prime minister’s office and CEO of BEDB, the Hengyi project will boost employment, with more than 750 jobs expected to be created in the first stage. “In addition, it will be Brunei’s second petrochemicals project, thus contributing to the nation’s objective of extending the value chain of the oil and gas industry,” he said.
Brunei Darussalam’s first petrochemicals project, as referred to by Haji Abdul Manaf, is a methanol plant at BEDB’s other large-scale industrial site, the Sungai Liang Industrial Park, with further facilities being developed to produce ammonia, urea, diammonium phosphate and ammonium sulphate. The existing plant has been in operation since 2010, with all of its output exported to Japan.
While a third of the feedstock for the new facility will come from the country’s own fields, such is the size of the plant that a further two thirds of the oil to be processed will be imported, including from Qatar. Brunei Shell Petroleum, Brunei Shell Marketing and Zhejiang Hengyi have signed a memorandum of understanding covering both the supplying of fuel needs and the purchasing of the end product from the refinery for a 15-year term.
Potential magnet for development
The Hengyi facility will serve as the cornerstone development for a petrochemicals and industrial park on PMB, with the plant offering a number of spin-offs for other companies. The BEDB hopes other petrochemical firms will locate to the island, attracted by the infrastructure and the raised profile PMB will receive from hosting the Hengyi refinery. Once operational, the refinery should also provide opportunities to service providers, from computer and technical support operators to catering, transport and logistics and maintenance firms.
The project has had an extended lead time, with discussions beginning in 2011. Some of the delay has been put down to the BEDB negotiating a greater role for local input into the project, including responsibility for dredging work to open up required shipping channels and the provision of other infrastructure. The development will also entail the construction of docks, a tank field, a power station and a seawater desalination facility.
With Chinese and other foreign firms undertaking much of the construction and technical fit out of the refinery, the project will have other knock-on effects for the local economy. As a result of an influx of foreign workers for the project, Brunei Darussalam’s real estate sector can expect an increase in demand in the residential rental component, while the hospitality and services sectors can also look forward to a rise in trade. Though these benefits may tail off somewhat after the construction phase of the development, it is likely the Hengyi refinery will still employ a number of overseas staff, whose presence will feed into the local economy.
Though more than half of the feedstock for the new refinery and aromatics plant will come from overseas and most of the final take will be exported, the economic benefits to the local economy will likely be many and long-lasting, giving Brunei Darussalam a stronger role in the energy sector far beyond that of an upstream producer.