Oil and Gas Industry in Brunei

Oil and Gas Industry inBrunei Darussalam.

Introduction

• Brunei Darussalam is the third largest oil producer in Southeast Asia and it produces 60 000 barrels of oil per day (b/p). About 90% of Brunei Darussalam’s revenue comes from the oil and gas industry and 95% of the Oil production are exported to other countries. Brunei Darussalam’s main exports consist of three major commodities – crude oil, petroleum products and liquefied natural gas – which are sold largely to Japan, the United States and ASEAN countries. The current gas production is approximately 27 million cubic meters per day and 90% of it is exported to Japan.

• Currently, Brunei Shell Petroleum Senderian Berhad (BSP) has seven offshore fields and two onshore oil fields. The offshore fields are South West Ampa, Fairley, Fairley Baram (which is shared with Malaysia), Magpie, Gannet, Iron Duke and Champion. One of the onshore oil fields is located in Seria. The Brunei Government is a partner with the Royal Dutch Shell Company and Jasra-Elf.

Distribution of Brunei Oil and natural gas field.

formation of Oil and Gas

• What is crude oil? It is kind of liquid fossil fuel. It is the original stage of oil petroleum which

has not been processed or refined yet.

Millions of years ago countless tiny plants and animals died and their remain sank to the bottom of the sea and were covered with layers of silt and mud. Over millions of years, these layers turned into sedimentary rocks by downward pressure. The decomposed bodies changed to petroleum (rock oil) because of pressure and heat.

Sedimentary rocks are made up of layers of permeable and impermeable rocks. Oil formed under these layers of rocks flows up through the permeable rocks until a layer of impermeable rock is reached. This oil is then trapped within two layers of impermeable rocks. The oil then accumulates in an oil trap

• Geological structures where oil and gas are found: Petroleum is found in pores in sedimentary rocks (layers of porous

sedimentary rocks). Accumulations of oil and gas are called oil and gas traps or reservoirs. In a trap, there will be layers of gas, oil and water. Above and below the reservoirs are layers of non porous (impervious) rocks.

types of oil traps.

• There are 4 types of oil traps. 1) Anticlinal trap.

Folding usually causes layers of rock to form anticlines and synclines. Oil and Gas being lighter tend to float to anticline while water remains below them.

2) Fault trap

Faulting may cause layers of porous and impervious rocks to lie next to each other. The oil in porous rock is trapped because impervious rock prevents it from moving further upwards while the pressure from below does not allow it to sink downwards.

3) Stratigraphic trap

Occurs when a layer of porous rocks is trapped between two layers of impervious rocks. Due to forces and movement in the earth, non porous rocks are pressed together, trapping the oil in porous rocks between them.

4) Salt Plug/ Salt Dome trap

Formed when huge of molten salts moves up and solidifies in the crack of an oil bearing porous rocks.

factors encourage the growth of Oil and Gas industry in Brunei.

a) Availability of oil and natural gas.

Brunei has rich oil and natural gas reserves. Onshore oil field are Seria and Rasau. Major offshore oilfield are S.W Ampa, Fairley, Fairely Baram (which is shared with Malaysia), Magpie, Gannet, Iron Duke and Champion.

b) Availability of markets/demand.

Large overseas market for the crude oil. The markets of the exported crude oil in 1994 are: Japan-26.8%, Korea-24.2%, Thailand-21.6%, Singapore-17.2%, Taiwan-5.3%, Phillipines-3%, Malaysia-1.9%. About 43.7% of crude oil was sold to ASEAN markets.

The natural gas is liquefied and sold to Japan and Korea as Liquefied gas (LNG). About 7.5% of the gas piped to Lumut is used as fuel in household.

c) Availability of Capital

Apart from funding of Brunei Government, foreign capital has been enlisted to finance huge costs involved in oil exploration, production and transport. The BSP Co. is owned jointly by Brunei Government and Royal Dutch Shell.

d) Labour

60% of the management, specialist supervisory and technical administration staff are made up of local people. The rest are expatriate from Europe, USA and neighboring countries in Asia. Contractors with their own employees from Philippines, Thailand and Malaysia.

e) Technology

Oil exploitation requires the use of advanced equipment of technology. Brunei has invested heavily on the latest technology and has introduced modern seismic surveying in their search for new oil reserves.

f) Transport

Pipelines, both on land and Submarine have been constructed to convey oil from oil refineries or directly to oil tankers.

methods of exploration/to search for oil traps

• The task of Oil exploration is to locate sites where there are geological structures in which oil might have trapped. The first step is to study all the available geological data and to prepare detailed maps.

• Aerial photographic surveys are often undertaken especially on remote locations. Satellite images and taking rock sample by the geologist are also done. But the most widely used method is Seismic Surveys. Carried out by geologist, a seismic survey can be carried out without disturbing people or damaging the environment. It is an important tool for finding and mapping potential oil fields. Geologist carry out seismic survey by sending down sound or shock waves into the rocks and measure the signals.

• The use of the signals to build up an accurate 3D picture of the rock structure under the ground. They look to find oil traps. When a reservoir (oil traps) is found, test drill is carried out. This is to make sure the reserves (oil and gas) are of sufficient quality and quantity to exploit commercially.

• Exploration is very expensive (costly). In 2001 Brunei Shell employed over 800 people in the exploration division. A test drill cost about $25 millions. Exploration is important because oil and gas are non-renewable resources.

methods of extraction/drilling for Oil and Gas

• If the test drill is successful then the reservoir is drilled properly. A drilling rig (platform) is towed out to the reservoir. Oil well are drilled with rotary drilling bit which work on the sane principle as an ordinary drill. The cutting tool is the drilling bit which is made up of tough metal or sometimes it has diamond teeth that can cut into the hardest rock beneath. The revolving drill is forced down into the rocks. The drill head (bit) is lubricated by a mixture of mud and water, the drill can be vertical or it can be a directional drill so that they don’t have to move the platform to many times.

• Most of Brunei oilfield are offshore so two types of drilling rig are used. In shallow water a jack up drilling rig are used. The legs of the jack up drill stand on the seabed. If the water is deeper a semi submersible is used. Motors on each of the legs help to keep the platform in place.

• When a well goes into production, the derrick is removed and an assembly of pies and valves called Christmas trees is sealed into the well head to regulate the flow of oil into the surface pipes which leads to the storage tanks.

• When a well is first drilled the pressure in the reservoir is high and oil and gas comes up to the surface naturally. However, when some reserves have been removed the pressure drops and oil and gas do not flow naturally to the surface. Gas or water must be pumped into the reservoir to keep the pressure high as to pump (extract) the oil up by means of nodding donkeys as seen in the Seria oil fields.

• Oil and gas from the well is called crude. Crude oil and gas is a mixture of oil, gas and water and is also known as complex hydrocarbons. Crude oil and gas is impure and cannot be used directly. Therefore, it must be pumped to a refinery (by pipeline) for refining.

Diagrams concerning methods of exploration and extraction of Oil and Gas

methods of processing Oil and Natural Gas

• Oil refining in Brunei takes place mostly in Seria, where a huge refining complex exist.

• Seria was developed as an oil refinery because: Its coastal location made it easy to receive crude oil from the offshore fields

such as South West Ampa, Fairley, Magpie and Champion. The land is flat and ideal for building large complexes It is linked by roads to other important towns such as Bandar Seri Begawan,

the nation’s capital. There is large market for motor vehicle petroleum and aviation fuel. There is a large labour force to supply the needs of the oil and gas industry.

how oil is refined?

• As crude oil from the major field are linked with pipeline to the oil refinery in Seria, the crude oil is essentially a mixture of many different oils. It is refined through a process known as fractional distillation. There are 3 process involve: heating, purifying, and separating. First the crude oil is heated until it reaches vapour form. As the vapour passes through a steel tower known as fractionating column, it is cooled and condensed back to form different liquids. The different liquids or kinds of Oil are collected in trays before being drawn out by pipes. The lightest or highest fraction is petroleum gas, the most valuable and important oil product. Others are petrol jet fuel, diesel, lubricants and bitumen

diagram of fractional distillation

methods of processing natural gas (LNG)

• Natural gas is refined in Lumut liquefication plant. Here the natural gas is turned and process into liquid known as liquefied natural gas (LNG). There are also three processes: heating, purifying and freezing. Gas is heated and purified to removed unwanted hydrocarbons and impurities. The purified gas is then cooled. Then the gas is liquefied (turned to liquid) by reducing the temperature to -161 cF. The gas shrinks to 1/600 (one six hundredth) of its original volume. The gas remains liquefied in the storage tanks, in the pipelines and on the tanker ships. When the gas reaches Japan, it is allowed to warm up again to generate electricity.

methods of transporting oil and gas.

• Once extracted, the crude oil is not processed immediately. They will be transported to processing areas called refineries. Where they will be transformed into various oil product and lubricant.

• The most convenient way to move oil over land is to pump it through a pipeline.

• With offshore drilling that is offshore oil field, underwater pipelines have to be constructed. These are laid by special pipe-laying barges on which the lengths of steel pipe are welded together before being laid on the sea bed.

• For export, sea route are used. Modern ship tankers are efficient and flexible, capable of carrying crude oil or products such as fuel oil, gas oil, jet fuel or lubricating oils.

• In Brunei, onshore and offshore crude oil is piped to the Seria terminal before being exported out. From this terminal, the crude oil is piped eight kilometers out to sea where tankers load the oil from two single buoy moorings. Natural gas is piped to Lumut where it is liquefied and transported in LNG tankers to Japan and Korea.

markets

• Main markets is the foreign export, especially Japan. Brunei also sells oil and gas to North Korea, Thailand, and Singapore. Only a small amount of oil and natural gas (about less than 5%) are used domestically. It fuels the electricity generating station at Gadong. It also provides cheap fuel for cars and trucks.

importance of oil and gas industry to Brunei Darussalam.

• Almost 90% of Brunei revenues comes from Oil and Gas industry. The revenues from oil and gas industry can improve and increase the economy of Brunei which allows many people in Brunei to have a good quality of life and high standard of living. The oil and gas industry can provide jobs for the local as well as the foreigners. It also can create work for companies who sell related goods and services to oil industry. The Oil and Gas industry account for 95% of Brunei’s export to keep the currency strong.

• With the revenues (high GNP per capita), the government of Brunei can improve infrastructures and employ civil servant. The government has built large infrastructure projects of Brunei people such as new schools, roads etc. there are also many good facilities like sports stadium, swimming pool etc. There is also cheap petrol and electricity, no taxes, a good pension scheme provide by the government. Enables many local citizens to be employed by the government as civil servant with high salaries and good benefits.

• Some 40% of the country’s oil reserves are found in the Champion field, which is situated in 30 meters of water about 70 km northeast of Seria. This field produces more than 50 000 b/d. The oldest field in Brunei is South West Ampa, 13km off Kuala Belait. It holds more than half of Brunei’s total gas reserves and the gas production accounts for 60% of the country’s total output. The onshore oil field in Seria, which is the country’s first oil well drilled in 1929, still produces around 10 000 b/d which is used mainly for domestic consumption. However, Seria still plays and important role in that it serves as the base from which crude oil is exported to other countries.

• The oil and gas industry remains an important sector in Brunei’s economy and it continues to play a dominant role even as the nation strives to diversify into non oil industrialization. Brunei is the world’s fourth largest producer of liquefied natural gas (LNG). 90% of it is exported to Japan namely the Tokyo Electric, Tokyo Gas and Osaka Gas Companies, the domestic market, however takes up only 2% of the LNG produced.

• The Brunei Liquefied Natural Gas plant at Lumut, one of the largest in the world was upgraded and expanded at a cost of 100 millions. The LNG from the plant is transported to Japan by a fleet of seven specially designed 100 000 tonne tankers with a capacity of 73 000 cubic meters of LNG each. The sale of LNG has grown to be as important a revenue earner as oil exports.

• At the current rate of production, proven reserves of natural gas are estimated to last for another 40 years. However, the discoveries of new gas fields and the possibility of more finds will enable Brunei to benefit from the growing demand for LNG in Asia which is needed primarily for power generation.

Done by : Izhharuddin Den Bungsu