This paper seeks to explain the linkage between oil and development in Brunei Oil is presently the biggest business in Brunei As elsewhere it is fraught with political overtones The oil industry in Brunei is dominated by Brunei Shell However unlike the position of oil companies in other oil exporting countries that of Brunei Shell is so dominant and privileged that it has created for itself a state within a sultanate Indeed it is fashionable to speak of Brunei Shell and Brunei as one entity But as the nation prepares for independence the anomalous state company relationship is likely to wear thin From the econometric perspective there are hardly any forward or backard linkages arising from the activities of Brunei Shell The real linkage however lies in the fact that Brunei finances all its projects from petro dollars