Brunei's oil-based economy expanded 1.7 percent in the June quarter from a year ago, with a drop in production offset by the hefty increase in crude prices, the government said Tuesday.
When compared with the previous quarter however, the economy contracted 2.7 percent as oil production fell, the official Brunei Economic Bulletin said.
With growth in the first quarter at 1.3 percent, Brunei's economy expanded by an average 1.5 percent in the first half of this year.
Average weighted oil production declined 4.1 percent year-on-year to 193,504 barrels per day in the second quarter, but this drop was offset by a 44.5 percent rise in crude prices which averaged 55.19 dollars a barrel during the period.
Production of liquefied natural gas (LNG) also fell 11.5 percent but this was tempered by a 21.8 percent surge in LNG prices.
"On the whole, the net effect was a contraction in the total output of oil and gas sector by 6.3 percent year-on-year," the bulletin said. Compared with the previous quarter, the decline in output for the sector was 11.1 percent.
Brunei however posted a budget surplus of 852.56 million Brunei dollars (505 million US) due to the high oil prices and a decline in expenditures. The surplus is expected to continue in the second half of the year.
The economic bulletin said economic growth for the third quarter to September was expected to be "modest".
Despite high oil prices and strong demand from China and India, oil companies are expected to moderate production as part of conservation efforts.
Ruled by Sultan Hassanal Bolkiah, the absolute Malay Muslim monarchy on Borneo island offers a cradle-to-grave welfare system to its more than 370,000 subjects.
Brunei ranks behind Indonesia and Malaysia as Southeast Asia's third biggest oil producer, and is the world's fourth largest producer of LNG.
The government has embarked on an ambitious plan to diversify the economy and reduce its dependence on the oil and gas sector.