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Logo of Phnom Penh Post newspaper Phnom Penh Post - Oil companies line up to drill off shore

Oil companies line up to drill off shore

Oil and gas exploration companies are lining up for a slice of the action in Cambodia's offshore oil field.

A Chevron-led consortium signed an agreement with Cambodian National Petroleum Authority (CNPA) chairman Sok An on July 6 to begin drilling in an area 120 km off the coast known as Block A, and oil could be flowing in not much more than a year.

Meanwhile a Chinese company and a French company have met separately with Prime Minister Hun Sen to express their interest in exploration.

But a warning has been sounded that Cambodia has yet to pass any laws controlling the exploitation of its petroleum reserves and is in danger of falling prey to the so-called "resource curse," whereby through poor governance oil revenues could be corruptly diverted and most people receive little benefit.

Eang Sophalleth, Hun Sen's personal assistant, said Hun Sen met Charles Mattenet from French Company Total Petroleum on July 7, and Yao Pinli, public communications director of the China National Oil Company, on July 3.

"Samdech Hun Sen welcomed the projects, which could generate more revenue to the state budget, and advised them to meet with Sok An for further discussion," Sophalleth said.

Men Den, director of exploration and production at CNPA, said it was a good sign that the Chinese and French companies intend to explore for oil and gas in Cambodia, which had numerous oil deposits and an estimated three trillion cubic feet (85 billion cubic meters) of natural gas.

"The China National Oil Company is the third biggest company in China and it specializes in exploring for oil and gas," Den said.

On July 6, Sok An signed an agreement to drill in Block A with a consortium comprising the US company Chevron Oversea Petroleum Cambodia Ltd (55 percent), Japan's Mitsui Oil Exploration Co Ltd (Moeco) (30 percent) and South Korea's GS Caltex (15 percent).

Chevron Texaco announced last year that its affiliate had discovered oil in four exploration wells in Block A. The 6,278 square kilometer block encompasses the Khmer basin, with water depths averaging 70 meters.

On June 27, Chevron Texaco Cambodia transported drilling equipment including more than 2,000 tons of cranes and rods to Sihanoukville port.

Sihanoukville port deputy director-general Ma Sun Hout said Chevron had signed a one-year contract with the port to lease one hectare of land to store the equipment and the company would need roughly 15 hectares when drilling began next month.

"The equipment will be taken to the well sites next month," Sun Hout said. "We will do our best to help them make the drilling process go well."

The CNPA's Den said Chevron had already drilled five wells since 2002 and would now start to drill other wells, but it would take more than a year to get into production.

"They are still in the studying process," Den said, "I estimate they will spend between $700 and $800 million on drilling,"

Den said several companies had looked for oil in Cambodia's offshore waters since 1992 but had withdrawn after calculating they would have to invest a lot for a limited return.

World Bank economist Hout Chea said Cambodia could potentially get considerable benefit from exporting its oil and gas reserves, but good management would be needed to keep the economy stable.

Sam Rainsy Party lawmaker Yim Sovann, chairman of the National Assembly's Anti-Corruption Commission, said Cambodia did not have a law on the oil sector or on oil income management yet, and should establish clear policy guidelines before allowing oil exploration companies to proceed any further.

"We need to have an effective law, otherwise they will explore in anarchy and income will be lost to corrupt officials," Sovann said.

The World Bank Cambodia's June newsletter described the "resource curse" as the observation that since the 1970s, countries rich in natural resources (particularly oil, gas, and minerals) had achieved a slower rate of economic growth than resource-poor countries. Oil in particular generated a huge revenue stream for a government, but the number of taxpayers contributing to the oil revenue would be small. This made a government feel less accountable to its citizens and often led to worsening governance and large-scale corruption.

The government awarded the petroleum production-sharing contract covering Block A to the Chevron Oversea Petroleum Cambodia and Moeco on August 15, 2002..

"There is a great momentum to promote the exploration, development and production of petroleum resources as well as to secure further international investment in Cambodia's oil and gas industry," Sok An said after the signing agreement ceremony at the time.

"We hope that exploration work by the Chevron Texaco and Moeco will succeed in finding hydrocarbons in offshore Cambodia and bring economic benefits to the people of Cambodia as well as to the company."



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