If you can't find a job, consider Brunei

When I was in the FX markets, we all lusted to get Brunei as a client.

They were a major participant in our business, and the Sultan of Brunei was the richest man in the world at that time. I love old cars, and the Sultan had one of the greatest collection of unique and exotic cars in the world. He also has enough oil to run all of them at the same time.

Brunei is a small country, with the official name of the State of Brunei, the Abode of Peace. It is located in the island of Borneo, surrounded by Malaysia on one side, the South China Sea on the other. The population of Brunei is about the same size as Kansas City, to give you an idea. It is ranked 5th in the world by GNP per capita at PPP, its wealth due to oil and gas reserves. My old friend the Sultan of Brunei is its absolute ruler.

So why am I talking about Brunei?

Last week I saw that Brunei LNG Sdn announced that they would increase storage at its natural gas liquefication plant by more than 60%. So I started looking at LNG in general which led me to Japan which is the world’s largest importer and consumer of liquefied natural gas.

Japan is power hungry, after the shutdown of all but one of its nuclear power plants. To make up for the shortage, Japan is burning a lot more oil than it has in four years, according to a recent Bloomberg report. Incremental demand of about 400,000 barrels a day from Japan maybe one of the reasons oil prices have remained strong.

While Brunei LNG increases capacity, and Japan looks for other sources, such as the US, Japan also needs to increase its own capacity to turn the LNG back into natural gas. And this may take a while. So Japan is stuck between a rock and a hard place, gobbling up oil as its economy tries to pick up steam.

In 2011, Japan’s use of crude oil for power generation rose 118%, rising in the second half of the year to almost four times the amount used in 2010. In the first few months of 2012, demand was running close to 180% higher than the previous year. With the cost of oil so far above the cost of nuclear power, Japan may be tempted to jump start some of the nuclear power plants that were shut down after Fukushima. Why? Because without energy, Japan’s precarious economic recovery is at risk.

So what to watch for? Watch for Japan turning on some of their nuclear power plants, or should I say watch out? Watch for announcements of increased storage facilities for LNG. Be aware of this additional factor impacting oil prices. Research LNG producers, such as Cheniere Enrgy Inc, (LNG) and let me know what you think. Read Brunei news, or apply for a job at Brunei LNG. Why not?