Malaysia’s state-owned oil giant Petronas will cut oil production in 2017 to between 600,000 and 630,000 barrels per day (bpd), from the average of 693,000 bpd in 2015 and 654,000 bpd over the past five years. Likewise, Brunei agreed to make “voluntary adjustments” to crude oil production over the next six months in line with a declaration by members and non-members of the Organisation of the Petroleum Exporting Countries (OPEC) issued in December last year.
Both countries’ cut is part of the 558,000 bpd in cumulative reductions agreed by them and nine other non-OPEC members, adding to the 1.2 million bpd cut OPEC members agreed on. This will take a significant volume off from global oil production in 2017 in a bid by oil exporters to drive crude oil prices up from multi-year lows.
The other countries are Azerbaijan, Bahrain, Equatorial Guinea, Kazakhstan, Mexico, Oman, Russia, Sudan and South Sudan. Indonesia was suspended from OPEC on November 30 for refusing to participate in the production cut.
For Brunei, one of the most energy-reliant economies in the world where oil accounts for 60 per cent of gross domestic product (GDP) and more than 90 per cent of government revenue, the cut will inevitably put more pressure on the state budget.
Brunei’s budget deficit is set to reach $2.65 billion for the fiscal year ending in March, equivalent to roughly 17 per cent of GDP, one of the highest ratios in the world. However, in case the production cut fails to adequately lift oil prices, Brunei even said it is ready to agree on an extension by another six months.