Brunei, Germany plan new oil refinery

Brunei, Germany plan new oil refinery

BANDAR SERI BEGAWAN (Reuter): Brunei's Oil and Gas Agency signed a letter of intent to build a refinery in Brunei costing 2.6 billion marks (US$1.5 billion) with state-owned German engineering company IAB, the company said yesterday.

The signing was witnessed by German Education, Science and Research Minister Juergen Ruettgers, who is accompanying German Chancellor Helmut Kohl on a two-day official visit to Brunei.

The head of the board of IAB, Claus Flockenhaus signed the accord with representatives of the Brunei agency.

IAB said in a statement a feasibility study for the project should be completed by the end of 1997 and construction would take four and a half years.

The refinery will be capable of processing about eight million tons of crude oil and atmospheric residues a year.

The tiny oil sultanate set in March an oil export target of around 170,000 barrels per day (bpd) at an average price of $18 a barrel until 2000.

It currently exports around 96 percent of its oil production, mainly to South East Asia and Japan.

IAB said it expects $500 million of the cost would go to German companies in orders for the project, mostly to companies in east Germany.

IAB, which specializes in the design and construction of petrochemical complexes, is based in Leipzig in eastern Germany. The refinery will include a catalytic cracking unit and will produce mainly gasoline, diesel fuel and kerosene for export, mainly to South East Asia.

Kohl had talks on Thursday with Sultan Hassanal Bolkiah and they agreed to strengthen ties between the two countries, Ruettgers said in remarks at the signing.

Ruettgers and Brunei industry minister Pehin Dato Haji Abdul Rahman Mohamad Taib also signed a treaty on free flow of capital and secure investments, which paves the way for Germany to provide export credits for the refinery project.