US$15 billion China-invested refinery and petrochemical complex seen as having essential part to play as Brunei looks to reinvent itself in the face of stubbornly-stalled international oil prices and its own rapidly-dwindling gas and oil reserves.

Bridge-building: Closer China-Brunei ties set to deliver the massive Pulau Muara Besar refinery project.

The news that work on a 2.7km bridge connecting Bandar Seri Begawan, the Brunei capital, with the neighbouring island of Pulau Muara Besar (PMB) had been completed late last month marked the successful conclusion of the country's first Belt and Road Initiative (BRI) project. It is, however, only one small element of the far wider-reaching China-backed development that will transform the island into one of the region's primary refining and petrochemical hubs.

Once completed, the US$15 billion refinery and petrochemical complex is expected to provide up to 10,000 jobs and play a crucial role in weaning the Brunei economy off its traditional dependence on its crude oil and natural gas exports. Although work on the bridge was led by the China Harbour Engineering Company, a Beijing-headquartered subsidiary of the huge China Communications Construction civil engineering conglomerate, the construction of the plant proper is down to the Hangzhou-based Zhejiang Hengyi Group (Hengyi). Under the terms of its agreement with the Brunei government, the company, one of China's largest suppliers of raw materials for the textile industry, funded the $3.4 billion facility and will be responsible for its day-to-day operations once it comes online late next year.

Another Chinese company, Lanzhou LS Heavy Equipment, a specialist in the provision of petrochemical systems, meanwhile, has been contracted to build a number of the refinery's key production units. These include an aromatics facility with a capacity of 1.5 million tonnes per annum and a 2.2 million TPY (throughput yield) hydrocracking unit.

Overall, the refinery is shaping up to be both China's largest, privately-owned facility outside the mainland and, by far, the most expensive overseas-backed project in Brunei's history. Once operational, it will have the capacity to process 160,000 barrels a day, while also providing feedstock for Hengyi's terephthalic acid production, an intermediate material required to make polyester. It is also hoped that, in time, it will produce a sufficient level of fuel to allow Brunei to successfully compete with Singapore, currently the dominant regional oil hub.

Back in March, in order to finance the project, Hengyi Petrochemicals became the first company to issue BRI corporate bonds – a financial instrument newly approved by the China Securities Regulatory Commission – and successfully raised US$79 million on the Shenzhen Stock Exchange. It is money that the company is clearly going to need.

Earlier this year, it was announced that the second phase of the PMB project will cost some $12 billion. This will see the refinery's capacity expanded to 280,000 barrels a day and will also fund units capable of producing an annual TPY of 1.5 million tonnes of ethylene and two million tonnes of paraxylene.

The scale of the project is a sure indication of its importance to Brunei. Although the country is the second-richest per capita in the ASEAN bloc, after Singapore, low oil prices have seen its economy contract significantly over recent years, while also driving up the level of unemployment. Although, after four years of contraction, the country's economy rallied slightly last year with its GDP growth estimated at 1%, it is still being far outstripped by many of its fellow ASEAN states.

As well as the currently stalled oil prices, the country's oil and gas reverses – long its economic lifeline – are expected to be exhausted within 20 years. In anticipation of this, many of the global petrochemical companies have already cancelled plans for further investment in the country.

The PMB facility, then, is therefore clearly a key initiative and will help the country maximise profits from its dwindling reserves. At the same time, it will also nurture the capability and expertise required to service the increasing number of oil and gas fields coming online across the wider region.

Some institutions, however, are not hanging around to see if Brunei can successfully reboot its economy. Back in 2014, Citibank shuttered its branches and pulled out after 41 years in the country. A year later, HSBC followed its example, again ending its ties to the country. Widely seen at the time as swimming against the tide, the Bank of China opened its first Brunei branch in 2016. Given recent events and current forecasts, that might not have been quite the reckless move it seemed at the time.

According to the International Monetary Fund's recently published Regional Economic Outlook for Asia and the Pacific, the country's economy may expand by up to 8% in 2019, maintaining average growth of 5% for several years thereafter. Significantly, one of the cited reasons for this likely resumed growth was the imminent completion of the PMB facility.

While climbing aboard the BRI bandwagon is clearly in Brunei's interest as the country seeks to reinvent itself in economic terms, Beijing's interest in its 3,900km distant trading partner is far from altruistic. Back in 2014, the two countries pledged to work together on the development of the Brunei-Guangxi Economic Corridor (BGEC) as a means of developing mutual trade, particularly with regard to halal products, tourism and shipping. Over recent years, the BGEC has been subsumed into the overall BRI project.

Brunei: Will the BRI rally to the rescue as the country's oil and gas reserves near exhaustion?

In terms of its BRI significance, Brunei also has the benefit of being set at the very heart of the Brunei-Indonesia-Malaysia-Philippines East-Asian Growth Area (BIMP-EAGA). Given the surging prosperity of this region, the BRI may allow Brunei to resume its classic role as a preeminent trading hub, boosting China's hopes of facilitating international trade to a scale never before seen.

More prosaically, China and Brunei have both staked a claim to the 370km-long Louisa Reef, one of the disputed areas of the South China Sea. It is now hoped that the close co-operation the two countries currently enjoy will allow them to jointly explore the reef's potential economic benefits, rather than remaining a continuing source of tension between the two.

Marilyn Balcita, Special Correspondent, Bandar Seri Begawan

US$1.7 billion, 30km-long structure set to deliver on long-term commitment to link national capital and Temburong.

The Temburong Bridge: Set to boost Brunei's nascent tourism sector.

Work on a major section of Brunei's US$1.7 billion Belt and Road Initiative (BRI)-backed Temburong Bridge was completed late last month. Once fully constructed, the bridge will link Bandar Seri Begawan, the national capital, with Temburong, an enclave separated from the rest of Brunei by Malaysia and Brunei Bay.

The largest infrastructure project in Brunei's history, the 30km-long structure is set to become Southeast Asia's longest ocean-span bridge, easily outreaching the current record-holder – Malaysia's 24km Second Penang Bridge. Work on the project began in 2014, with construction said to be 97% complete. If all goes to plan, the bridge should open to road traffic later this year.

Brunei has high hopes that the project will deliver long-term economic benefits. Essentially, it represents the fulfilment of a long-term commitment to create a customs-free road link between the capital and Temburong, an increasingly popular tourism destination.

With a land area of just 5,765 sq km, Brunei comprises two territories – Brunei-Muara and Temburong – separated by the Malaysian state of Sarawak. Until the bridge opens, commuters travelling between the two must negotiate their way through four frequently congested Malaysia-Brunei immigration checkpoints.

Commissioned in 2014 by Brunei's Ministry of Development as part of efforts to stimulate the country's economic development, the bridge was always visualised as two distinct construction projects – a 11.6km land viaduct crossing the Labu Forest Reserve and the 18km bridge proper extending out across Brunei Bay. China State Construction Engineering Corporation (CSCEC) was appointed to oversee the viaduct, while Seoul-headquartered Daelim – South Korea's longest-established construction company – won the contract to build the bridge.

When CSCEC first began work on the project in October 2015, oppressive heat and humidity, combined with intermittent access to power and fresh water, hampered construction. An added challenge came from the statutory requirement to protect the region's rare mangrove vegetation and wildlife. To overcome this particular difficulty, CSCEC installed major sections of the viaduct using "fishing technology," an innovative construction process that keeps heavyweight equipment from impacting the ground and potentially harming local flora and fauna.

Once the bridge is open, the key beneficiary is expected to be the country's nascent tourism industry. The focus of this will be Temburong's prized, yet relatively unknown, Ulu Temburong National Park. A 50,000-hectare tract of tropical rainforest, it has been described by the Brunei Tourism Bureau as "without a doubt, the crown jewel of Brunei's green landscapes".

An engaging blend of lowland and mountain forests, the park's diverse ecosystem is home to a huge variety of unique species, as well as many of the country's traditional longhouse communities. Once officially opened, the bridge is expected to spur investment across the whole of the region's hospitality sector.

In line with this, work is already underway on Temburong's first luxury eco-resort – 30 riverside villas in the Kampung Perdayan district – which is due for completion later this year. In addition, a new river centre is being developed to service cruise boats heading into the Ulu Temburong National Park.

In preparation for this, Brunei is already actively engaged in moves to attract a higher number of Chinese tourists. In order to facilitate this, Royal Brunei Airlines, the national carrier, is launching direct flights to the new Beijing Daxing International Airport.

Chinese visitors accounted for 23.6% of Brunei's 278,000 inbound air passengers in 2018, a figure it is now hoping to boost to 450,000 in the near term. In a further move, 2020 has been officially announced as Brunei-China Year of Tourism by representatives of the two countries' governments.

Geoff de Freitas, Special Correspondent, Bandar Seri Begawan