Brunei Shell Petroleum

Brunei Shell Petroleum

BSP Head Office building in Panaga, Seria
Company type	Joint venture
Industry	Petroleum
Predecessor	British Malayan Petroleum Company (1922–1957)
Founded	1 January 1957 (1957-01-01)
Headquarters	Jalan Utara, Panaga Seria KB2933, Brunei
Area served	Brunei
Key people	Johan Atema (managing director)
Products	Coal seam gas, liquefied natural gas, natural gas, aviation fuel
Owner	Shell plc Government of Brunei
Parent	Royal Dutch/Shell Group
Website	www.shell.com.bn

Brunei Shell Petroleum (BSP) is a joint venture between the Royal Dutch/Shell Group and government of Brunei, primarily responsible for the exploration and production of oil and liquefied natural gas (LNG). Originally known as the British Malayan Petroleum Company (BMPC), it was established in 1922. BSP is crucial to Brunei's economy and political landscape, particularly regarding oil development and resource management. Its establishment and growth were closely tied to the Sultan of Brunei's decisions, as BSP provided essential insights into oil discoveries that influenced the Sultan's stance on joining Malaysia, thereby shaping the country's economic and political independence. Due to a lack of personnel, Brunei does not want to create a state oil corporation; nevertheless, the government does intend to raise its stake in BSP and solidify its influence over the energy industry.

The Petroleum Unit, a division of the Prime Minister's Office, plays a crucial role in formulating policies for production, conservation, and pricing, while also overseeing Brunei Shell companies through board participation. In early 1993, a new government body, the Brunei Oil and Gas Authority, was created, headed by the Minister of Finance and Economy. This organisation is expected to assume some responsibilities from the Petroleum Unit, including determining output levels and granting concession rights.

History

On 20 July 1922, the British Malayan Petroleum Company was established under the Royal Dutch-Shell group and registered as a business in the United Kingdom. The Asiatic Petroleum Company and Shell's Anglo-Saxon Petroleum Company sold oil-prospecting concessions to the BMPC the same year, giving the BMPC broad mining and prospecting rights in Brunei. Shell gained nearly monopolistic control over oil exploration in Borneo as a result of the arrangement, which saw the BMPC pay a royalty of two shillings per ton (or 10% in kind) to the Bruneian government and another shilling to the British Borneo Petroleum Syndicate.

Labi drilling team in 1926

In 1922, BMPC began oil exploration in Labi, Brunei, where previous attempts by other companies had failed to yield significant results. The prospecting license of the Anglo-Saxon Petroleum Company in the Tutong District was renewed in November 1922 under the new name of the BMPC. Later, on 28 July 1923, an agreement was made for the BMPC to acquire the British Borneo Petroleum Syndicate's Belait District properties. The BMPC carried out an aerial reconnaissance on 9 March 1925, and neither the Sarawakian nor Bruneian governments objected to the plan. After encountering difficulties in Labi, BMPC shifted its focus to the area between the Seria and Bera rivers, where it successfully struck large oil deposits, now known as the Seria oil field, in April 1929. By 1949, BMPC had expanded its exploration efforts to include Brunei Town (now Bandar Seri Begawan), Tutong, and the areas between Seria and Labi. Offshore exploration began in 1952 as production in Seria and Jerudong stabilised.

BSP's Marine Platform "G" located off Seria coast in 1958

BMPC head office in 1956

The Brunei Shell Petroleum was reorganised and registered in Brunei in 1957 following the implementation of the Brunei Companies Enactment on 1 January of that year. On 15 March 1957, it officially took over operations from its sister company, the BMPC. The new name was chosen to reflect the growing scope of oil development, particularly on Brunei’s continental shelf. It was felt that a new company should align with the state under the new legislation, and Sultan Omar Ali Saifuddien III approved the inclusion of the name "Brunei" in the company's name. Furthermore, given the company's strong ties with the Royal Dutch-Shell Group, it was important to incorporate "Shell" to highlight its connection to the global operations of Royal Dutch-Shell. Its exploration area extended from Seria to Labi, Tutong, and Brunei Town after BSP assumed operations from BMPC. During the 1962 Brunei revolt, BSP oil installations were the focus of the TNKU rebels' coordinated attacks on government buildings and police stations around the protectorate and in the oil town of Seria. The BSP traded in earlier, less fruitful concessions in order to get new ones in 1963. About 4,000 square kilometres (1,500 sq mi) of the continental shelf and an extra 680 square kilometres of the Seria oil field were included in these new concessions.

Sultan Omar Ali Saifuddien III speaking during an oil pipeline's formal opening ceremony in Kuala Belait, 1964

The sultan of Brunei's decision to refrain from joining Malaysia in 1963 was primarily due to unresolved issues regarding the future of Brunei's oil economy with the Federation of Malaya. The BSP played a role in this decision by informing the Sultan of a significant oil discovery, cautioning that joining Malaysia could jeopardise Brunei's control over its oil resources. In 1966, concerns arose that the Sultan might retaliate against British actions by denying concessions to Shell and withdrawing sterling reserves from the Bank of England. During this period, the British government benefited from substantial profits from BSP, while Brunei held significant reserves in London. In 1968, BSP obtained a further offshore concession that included 298 square kilometres close to Labi and 3,735 square kilometres, some of which extended beyond the continental shelf. In order to maintain its position as Brunei's top concessionaire, BSP acquired an extra 3,530 square kilometres of offshore concessions by 1981.

On 5 June 1972, the Seria Crude Oil Terminal was opened by Sultan Hassanal Bolkiah. In 1975, the Brunei government established a 50-50 shareholding arrangement with the Royal Dutch Shell Group for the exploitation of Brunei's resources. Fears from the British government regarding Brunei's potential withdrawal from this agreement prompted the decision to keep the British Gurkha battalion stationed in Brunei until 1983, even after the country gained independence in 1984. The British Ministry of Defence acknowledged that the Gurkhas not only provided essential security for Shell's personnel and installations but also offered valuable training opportunities for British officers. While the Brunei government denied any direct link between defence negotiations and the Shell agreement, Brunei continued to cover the battalion's expenses, making it more economical for Britain to sustain their presence in Brunei. When oil prices started to decline in 1985, Japanese customers lost faith in Brunei's long-term contract and demanded a review of the agreement.

As of 1997, BSP has 10,107 square kilometres of concession land, of which 73% is used for offshore activities. In oil exploration and production, BSP maintains a near-monopoly despite the existence of competing businesses including Jasra-ELF (previously Jasra Jackson), Sunray Borneo Oil Company, Superior Oil, Clark Brunei Oil, and Woods Petroleum. As its interest in the oil and gas industry grew, the Bruneian government purchased a 25% share in BSP in 1973. The government's role in the sector was further cemented in 1985 when this share rose to 50%.

Business ventures

An AgustaWestland AW139 of the BSP Aviation Services Department (SAV) at Anduki Airfield in 2022

BSP is a conglomerate comprising five businesses as of 1997. Exploration and production of oil and LNG are handled by the primary business, BSP. Brunei Shell Marketing, formed in 1974, focuses on selling oil and gas products within Brunei, with ownership equally divided between the Brunei government and BSP. The LNG trade with Japan is the main activity of the other three businesses, Brunei Shell Tankers (BST), Brunei Coldgas (BCG), and Brunei LNG. Established in 1969, BLNG is a joint venture consisting of 25% BSP, 25% Mitsubishi Corporation, and 50% Bruneian government. In a similar vein, the Bruneian government owns 50% of BCG, which was established in 1977 to manage LNG marketing, while BSP and Mitsubishi each control a third. Last but not least, the BST, which was founded in December 1986 and is equally owned by the BSP and the Bruneian government, manages the shipping of LNG to Japan.

Brunei Gas Carriers

In the 1960s, significant gas reserves were discovered beneath the waters of Brunei, marking the beginning of a new era for the nation's energy sector. To capitalise on this discovery, a large-scale liquefaction plant was constructed, paving the way for the export of LNG, which significantly boosted Brunei's economic growth. LNG transportation commenced in 1972 with the first shipment to Japan, carried by the SS Gadinia, one of seven G-class ships operated by Shell Tankers UK. Between October 1972 and October 1975, the first four carriers were delivered, each with a maximum storage capacity of approximately from 75,000 to 77,000 cubic metres (2,600,000 to 2,700,000 cu ft).

In 1986, Brunei Shell Tankers (BST) was established to manage the fleet of seven French-built G-class LNG carriers, which were later renamed after local fish and shellfish: Bebatik, Bekalang, Bekulan, Belais, Belanak, Bilis, and Bubuk. This marked the beginning of the B-class fleet era, which spanned 46 years and played a pivotal role in Brunei's export-oriented energy sector. The era concluded in 2018 with the retirement of the final vessel, Bebatik, which had significantly contributed to Brunei's LNG industry.

Arkat at sea off Lumut in 2023

To continue Brunei's LNG transportation legacy, Brunei Gas Carriers (BGC) was established in 1998 as a joint venture involving Shell Gas BV, Diamond Gas Carriers BV, Sultan Hassanal Bolkiah, and the government of Brunei. BGC made its first LNG delivery in 2002 and gradually replaced BST, introducing a modern approach to LNG transportation. This included the deployment of four A-class vessels—Amadi, Amani, Amali, and Arkat—with capacities ranging from 137,000 to 154,800 cubic metres. These ships have been instrumental in delivering LNG to international clients, particularly in the Asia–Pacific region

Since its founding, Brunei Gas Carriers (BGC) has completed over 7,000 LNG cargo deliveries. The management of Brunei's LNG fleet is overseen by a collaborative team of local BGC staff and Shell International Trading and Shipping Company employees. In 2011, BGC established its own fleet management department, with a focus on knowledge transfer to prepare the company for independent operations. This effort culminated on 24 June 2019, when BGC received its document of compliance, becoming the first domestic deepwater shipping company in Brunei to own and operate its own fleet, marking a significant milestone in the nation's maritime industry.

Brunei LNG

Main article: Brunei LNG

BLNG's plant in Lumut, 2024

In 1969, the government, Shell, and Mitsubishi Corporation formed Brunei LNG as a joint venture. Over time, the government increased its stake to 50%. The construction and operation of the Lumut LNG facility, which was finished in 1973, was the company's primary objective in order to export LNG to Japan. The facility, which was built with assistance from Brunei Shell, Air Products and Chemicals, and Nippon LNG KK, is an example of transnational cooperation. It was constructed at an estimated cost of B$600 million and includes a 4.5 kilometres (2.8 mi) dock with stainless steel tubes for gas transportation and a unique water purification system. With the exception of the Gurkha security forces, the enterprise requires a significant amount of finance and employs around 100 individuals.

Brunei Shell Marketing

BSM was founded in 1974 to distribute oil and gas products within Brunei and is jointly owned by the government and Shell, with its headquarters located in Bandar Seri Begawan. The company offers a variety of products, including gasoline, aviation fuel, diesel oil, lubricants, butane gas cylinders, and certain chemical products like insecticides and detergents. Holding a monopoly on petroleum sales in the state, BSM has experienced significant sales growth, particularly as the number of motor vehicles in Brunei has risen. The company operates 21 petrol stations across the country, all supplied by its network, with fuel prices regulated by the government to remain low by international standards. High-octane petrol and diesel are imported from Singapore and stored in tanks at the Muara Port, which also supplies oil and petrol to riverine stations along the Brunei River and Temburong River. Additionally, Brunei Shell Marketing provides aviation fuels for the international airport in Bandar Seri Begawan and fuels for the main electricity generating plant located in Gadong, near the capital.

Community initiatives

BSP Flagship Solar Plant in 2024

In addition to significantly boosting Brunei's economy through oil production, the BMPC played a crucial role in developing infrastructure in the Belait District, particularly in Seria and Kuala Belait. Like its predecessor, the BSP remains vital to the growth of the Bruneian economy. Shell not only contributes to the nation’s revenue but is also the second-largest employer in Brunei, following the government sector. As a result, Brunei is often referred to as a "Shell State" because of its robust economic position and the close relationship between the government and Shell.

The Brunei Shell Recreation Club was established in 1946, the Kuala Belalong Fields Studies Centre in 1991, the Billionth Barrel Monument in 1991, the Anduki Recreation Park in 1992, the Outward Bound Brunei Darussalam in 1993, the Seria Energy Lab in 2002, the BSP Flagship Solar Plant in 2021, and the Brunei Energy Hub in 2023 are just a few of the community projects that BSP has undertaken and sponsored.

The Brunei Shell Joint Venture (BSJV) Scholarship Scheme, established in 1972, has provided educational sponsorships to over 800 students. The scheme aims to identify talented young Bruneians with the qualifications and potential needed to support the country's growth. It offers scholarships for students pursuing undergraduate studies after completing their A-levels or the International Baccalaureate Diploma.

References

Citations

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