Brunei contains proven crude Oil reserves of 1.35 billion barrels, as estimated in January 2006. In 2005 Brunei produced 237,000 bbl/d, of which 215,000 bbl/d was Crude Oil, plus around 22,000 bbl/d of Natural Gas liquids. Oil production in Brunei began in 1929, with the discovery of the giant onshore Seria Field. Production from Seria peaked at around 115,000 bbl/d in the 1950s, but has now fallen to around 27,000 bbl/d. Bruneis oil production peaked in 1979 at about 240,000 bbl/d, but was cut back deliberately to extend life of the fields and to improve recovery rates. Overall, the countrys Upstream oil sector requires around $300 million annually, according to the Petroleum Economist, in order simply to maintain current production capacity from mature fields.
Bruneis oil industry is completely dominated by Brunei Shell Petroleum (BSP). BSP extracts oil from seven offshore oil fields, including Champion (which contains about 40 percent of total oil reserves and produces around 50,000 bbl/d), Southwest Ampa (the oldest field, with more than half of Bruneis natural gas reserves and production), Fairley, Fairley-Baram, Gannet, Magpie (producing since 1977, now at 10,000 bbl/d), and Iron Duke. BSP also operates two onshore fields (Rasau and Seria-Tali). Another field, Egret, is expected to come online for oil production in 2006 and produce about 30 million barrels of oil over the next 15-20 years. Major customers for Bruneis oil include Japan, South Korea, the United States, Australia, New Zealand, China, and India. BSP, a 50-50 joint venture between Royal Dutch/Shell and the government of Brunei, for years had been the only oil producer in the country and still operates the countrys only oil refinery. Recently, the sector has opened to other players. In early 2002, for instance, Total, S.A.of France (which has been active in Brunei since the 1980s) was awarded an exploration License in Bruneis deepwater Block J, located around 60 miles offshore, along with partners BHP Billiton Petroleum (25 percent share) and Amerada Hess (15 percent). Brunei has an outstanding territorial dispute with neighboring Malaysia over the deep-sea acreage that includes blocks J and K off the coast of Borneo. In June 2003, Total suspended exploration work in Block J, following an April 2003 incident in which several naval patrol boats from Malaysia chased away a Total ship. In 2003, Murphy Oil (U.S.) and Petronas (Malaysia) discovered a large (700-million-Barrel) oil field -- called "Kikeh" -- which may extend into Block J. Brunei claims that Block J and the adjacent Block K (awarded to a joint venture of Shell, Conoco and Mitsubishi) are completely within its Exclusive Economic Zone (EEZ). Brunei is counting on Blocks J and K to maintain the countrys oil and gas output another decade or more, and without these Blocks, Brunei may be forced to move more rapidly away from an economy based on Hydrocarbons. Malaysian officials have offered to devise a joint-development zone with Brunei, but this would necessitate Brunei redrawing its contracts with Shell, Conoco, and Mitsubishi. In March 2004 Shell Malaysia announced a new oil discovery at Gumusut, near the disputed territory. The status of oil development in these disputed areas remains unresolved.