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Logo of Phnom Penh Post newspaper Phnom Penh Post - Cambodia needs more time for oil production, govt says

Cambodia needs more time for oil production, govt says

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Finance committee chairman says the delay will give the government a chance to build a regulatory framework for companies looking to exploit national reserves

Photo by: SOVANN PHILONG

The government says Cambodia may not produce its own oil until 2015, having stated beforehand an earlier start date.

AN expected two-year delay in output from Cambodia's first domestic oil field could be a blessing in disguise for Cambodia, the head of the National Assembly's finance and banking committee told the Post.

Cheam Yeap said a new timeframe for extraction from the Chevron-controlled field announced Friday, which puts the start of production anywhere between 2013 and 2015, would give the government more time to develop laws to govern the sector.

"It is not good to be in too much of a hurry, as we have neither the law nor experts now [to manage the oil resource], and the agreement [with Chevron] is still not clear," he said. "Consequently, losses may happen because we lack these things."

He said he planned to request that the government draft three laws related to the Kingdom's energy reserves - on oil control, oil tax and tax benefits within the energy industry - in a bid to better manage resources.

It is not good to be in too much of a hurry, as we have neither the law nor experts...

The London-based Extractive Industry Transparency Initiative has also been invited to hold four workshops in Cambodia to help guide development of the laws.

The Cambodian National Petroleum Authority is also widely considered to be under-funded and ill-equipped to handle the complexities of the oil business, analysts have said.

Hang Chuon Naron, vice chairman of the Supreme National Economic Council, announced the delay Friday in a gathering to launch energy revenue watchdog Cambodians for Resource Revenue Transparency. He said Cambodia would not receive income from oil and natural gas until between 2013 and 2015, two years later than originally planned.

The delay was put down to falling oil prices, but the government's relationship with Chevron has come under the spotlight in recent months after negotiations over an extension to the US energy giant's licence, which expired in April, came to a standstill.

Cheam Yeap said negotiations with Chevron were ongoing, and that the company was still actively exploring extraction. However, he said there was still uncertainty over the amount of oil and natural gas in the field.

Chevron was granted an exploration licence in 2002 to explore a 278-square-kilometre area under Cambodian control in the Gulf of Thailand. It announced in 2005 it had discovered up to 400 million barrels of oil reserves in Block A, and initially predicted oil would begin flowing by 2011. It has since refused to commit to a start date in what it says is a number of small dispersed fields rather than a single large block.

Cambodia has issued licences to explore 37,000 square kilometers under its control in the Gulf of Thailand, and it hopes to also issue exploration rights for a further 27,000 square kilometres in areas still under dispute with Thailand.

According to the International Monetary Fund, government revenue from oil reserves in the Gulf of Thailand could initially reach $174 million a year and climb to $1.7 billion a year after 10 years of development, almost matching the entire government budget for 2009.

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