Cambodia could earn $174 million from oil production in 2011, with the windfall rising
to $1.7 billion after 10 years, according to a new International Monetary Fund study
in the wake of recent oil discoveries by Chevron off Cambodia's coast.
The figures are contained in an Aug. 20 report that the IMF called a "moderate
scenario." It was based on a variety of assumptions - such as oil production
sharing agreements, size of recoverable resources and oil prices.
The IMF staff report cautioned that it was developed "to demonstrate the policy
challenges of an oil sector" - not to forecast revenues.
Still, the report said 2011 is a realistic date to assume Chevron would begin production
given that oil is already being produced on both sides of Cambodia's waters in the
gulf of Thailand.
It projected that after 10 years of production Cambodia's share of oil revenues would
peak in 2021 at $1.7 billion. Then revenues would begin to decline.
"We are not saying there will be an overwhelming benefit, but it is something
that is not insignificant and it is positive," IMF Resident Representative John
Nelmes told the Post.
"We tried to do a scenario, not an estimate," said Nelmes.
"There are a lot of uncertainties about the amount of oil available, but we
said, 'let's just assume there are 500 million barrels,' " he said.
The government's current revenues are 11.5 percent of current GDP, or $632 million,
so an additional $174 million in new revenues from a new source is a significant
"With continued high world oil prices, the net present value of oil wealth would
be around $15 billion - 115 percent of 2011 GDP," the report said.
The scenario relies on variables including:
- Continuing high world oil prices.
- That the government's share of oil revenues will come from three sources: royalties,
a state's share in the profits that is in line with standard Production Sharing Agreements,
and an income tax rate of 30 percent.
- There are 500 million recoverable barrels, including 300 million from Block A
and 200 million from other blocks licensed for exploration but not yet publicly discussed.
- That foreign direct investment will pay for infrastructure, not the government
A Chevron spokeswoman had no comment on the study.
The energy giant has not yet announced the results of its second round of exploratory
drilling in Block A, covering 1.6 million acres in the Gulf of Thailand. It obtained
the rights to the territory in 2002 with minority partner Mitsui of Japan, and in
2004 it gave its first indication of possibly substantial finds. Chevron has continued
exploratory drilling for the past two years. Meanwhile the government has issued
exploration licenses issued for seven other blocks.
A Chevron official told the Post in June that the corporation faces specific technical
challenges in the Block A. A third drilling campaign was being considered for late
"The oil and gas in the reservoir is unique for the Gulf of Thailand, in that
the hydrocarbons are dispersed rather than located in one core field," the statement
Despite the optimistic potential for an oil industry, the IMF warned there are many
potential policy pitfalls for the government to address. These range from possible
inflation to the so called oil curse - the corruption and conflict that can come
with new oil wealth in countries with weak institutions.
Oil revenues are complicated to manage, the report said, particularly because of
price fluctuations. Oil dependent economies tend to raise spending when prices are
high, without regard for when prices drop. The top priority for Cambodia policy makers,
the report said, is how the oil sector will be taxed. It said that oil revenues should
be funneled smoothly into the national budget, and not earmarked for special projects.
The paper cited experiences in Nigeria and Azerbaijan where oil discovery did not
lead to general economic improvement, but worked to weaken other thriving sectors
of the economy.
In Cambodia, the garment sector could be at risk if infrastructure improvements,
such as highways or affordable electricity, needed to nurture that industry were
diverted to help a new oil industry.
However the report said that more positive scenarios are possible. For example, larger
reserves could be discovered, particularly if agreement is reached on overlapping
claims with Thailand.