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Logo of Phnom Penh Post newspaper Phnom Penh Post - Overlapping claims complicate gas hunt

Overlapping claims complicate gas hunt

Overlapping claims complicate gas hunt

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With large volumes of gas being pumped from the Pattani Basin off the coast of Thailand, Cambodia is expected to some day reap the benefits of its own domestic gas supply from fields lying under the same waters.

But first the country must resolve a contentious, decades-old dispute with Thailand over some 27,000 square kilometers in the Gulf known as the Overlapping Claims Area, or OCA.

Although early drilling in Chevron's Block A in Cambodian waters off the coast from Sihanoukville has so far failed to yield significant gas finds, industry officials and geologists agree the prospects for the discovery of large natural gas deposits in the disputed area are high.

The Pattani Basin across the border in Thailand has been a reliable producer of gas for years and the geology of the basin reaches into the disputed area.

No estimates are available regarding how much gas - or oil for that matter - could be recovered from the OCA.

But Thailand's former Energy Minister Piyasvasti Amranand says Cambodia should be anticipating gas because the companies working in the Gulf of Thailand just across the border have been producing "mainly gas for 30 years."

"Although the geology is complex, in the overlapping claims area, that area is mainly gas," he said in an interview with the Post at an oil and gas conference in March.

Gas in the OCA would be a windfall for both countries.

Impoverished Cambodia could use it to generate much-needed power - alleviating chronic blackouts, electrifying rural areas and lowering the price of electricity for large development projects, said Deputy Prime Minister Sok An.

Domestic gas production could also enable Cambodia to replace costly imports of liquefied petroleum gas (LPG) and reduce the country's heavy reliance on charcoal for cooking.

Thailand could also boost its production to meet rising domestic demand which requires that it import much of its gas from neighboring Myanmar, whose shaky political environment makes it a risky supplier, industry sources say.

But talks over the OCA, which resumed in April after years of stalemate, are still in their early stages. The dispute goes back to the 1970s, but six years ago Cambodia and Thailand negotiated the joint development agreement that was hoped to resolve the problem.

According to the trade publication Oil & Gas Journal, the original model negotiated by Thailand and Cambodia called for a  50-50 split of resources, while now Phnom Penh authorities are pressing for a 60-40 sharing ratio. Oil & Gas Journal said Thailand will insist on the original 50-50 split.

Sources close to the negotiations say there are two components to the proposal on the table: to demarcate the upper part of the OCA with a border while leaving the lower portion to be jointly developed by Cambodia and Thailand, which would share in the costs and benefits of production.

One independent oil expert said Cambodia is likely to resist simply splitting the area down the middle since "the better prospects are on the Thai side," adding that the debate has already become too tangled in politics and nationalism to move forward.

"Keep the two countries out of it, keep the politics out and let the maritime experts and lawyers decide," said the expert, who due to the sensitive nature of the talks did not want to be named.

Another petroleum consultant warned that the dispute could take years to resolve, and depended heavily on global factors like the price of oil and gas, but that Cambodia could have the upper hand at the moment because "Thailand needs [natural gas] more."

 Who's got what, and where

BLOCK A: Awarded to Chevron’s group, it is the only block where major exploration activity is taking place. Chevron has 55 percent, Mitsui Oil Exploration Co., Ltd (Moeco) has 30 percent and GS Caltex Corporation has 15 percent.

BLOCK B: Awarded to Singapore Petroleum Company in a joint venture with Malaysia’s Resourceful Petroleum and Thailand’s PTTEP International. Each holds a one-third stake. Australia’s Cooper Energy pulled out in October 2007, selling its share to its partners.

BLOCK C: Awarded to Hong Kong firm Polytec, which holds 100 percent. Polytec officials said they hope to drill a first well this year.

BLOCK D: Initially held by China’s Zhen Rong Cambodia Energy Company but now in the hands of Petrotech Holdings of China, which bought 48 percent of Zhen Rong.

BLOCK E: Licensed to Indonesia’s Medco International Petroleum Ltd (41.25 percent), Kuwait Energy Co. KSCC (20.6 percent); Medco’s partner JHL Petroleum, Ltd (4.13 percent) and Sweden’s Lundin Petroleum (34 percent).

BLOCK F: Held by state-run Chinese National Offshore Oil Corp. (CNOOC), one of China’s largest oil companies.

(Susan Postlewaite)

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