Singapore’s KrisEnergy, the operator of Cambodia’s offshore Block A in the Gulf of Thailand, announced on Friday that in 24 months the Kingdom will be an oil producing nation after the firm made its final investment decision that day for extraction in the Apsara oil field.
The firm envisions that Phase 1A of the project will include a single unmanned facility with a 24-slot wellhead platform capable of processing up to 30,000 barrels of fluid per day with gas, oil and water separation facilities. Oil will then be sent through a 1.5-kilometre pipeline for storage on a permanently moored floating vessel.
Kelvin Tang, KrisEnergy’s chief executive officer and president of Cambodian operations, said that the final investment decision puts the company one step closer to oil extraction after it formally signed a petroleum revenue sharing agreement with the Cambodian government in late August.
“Our technical and operations teams are preparing the necessary tenders for materials, equipment and services,” he said. “In parallel, consultations continue with parties interested to join this groundbreaking project to reduce our operational risk and capital expenditure exposure.”
KrisEnergy holds a 95 percent stake in Cambodia’s Block A, with a division from the Ministry of Economy and Finance holding the rest.
Finance Minister Aun Porn Moniroth claimed in August that Block A was believed to hold about 30 million barrels of oil, which would be extracted over the course of nine years. With the price of Brent crude currently hovering around $50 a barrel, the government expects to earn $500 million in total income from royalties and taxes over the project’s lifespan.
Tang had previously given The Post a conservative prediction that Phase 1A alone had a defined best estimate of 8.5 million barrels of oil, a figure that admittedly made the project only marginally profitable.
Tanya Pang, KrisEnergy’s vice president for investor relations and corporate communications, said that as the firm is publically listed on the Singaporean stock exchange, it could not release an estimate for how much the company would spend on Phase 1A.
“We do not provide forecasts on a project basis,” she said in an email, adding that capital expenditure projections are done on a country-by-country basis that would be released in half-year and full-year financial statements.
“As we have only [one] single asset in Cambodia, the projected and actual spending [amount] will be evident,” she said.
She added the firm is aggressively looking for investment partners to reduce technical risk and capital exposure by farming out construction operations as well as potentially selling a minority stake of the 3,083-square-kilometre tenement.
“We are talking to several parties which have expressed an interest in holding a stake in the Cambodian Block A Apsara oil development,” she said. “From our side, any incoming joint-venture partner must have the financial wherewithal and the long-term perspective in its business model to see through the different stages of the Apsara development.”
KrisEnergy has struggled to get out of the red since 2014. The firm currently carries $383.7 million in debt as of June of this year.
Adrian Pooh, an Asian upstream specialist at energy research company Wood Mackenzie, said that KrisEnergy needed to move forward with the project despite its moderate profitability forecast.
“For KrisEnergy, this improves their production outlook,” he said in an email. “Without Apsara, KrisEnergy’s production would peak in 2019 at 7MMBOE [Million Barrels of Oil Equivalents] and enter a decline phase.”
He added that due to the significant capital investment needed to jumpstart the project, which he estimates to cost from $145 million to $150 million over the 24-month timeline, KrisEnergy needs to quickly find partners to fund the development.
“There is some level of urgency as KrisEnergy needs to secure a partner to de-risk and progress the project,” he said. “Mid-2018, would be a critical time [for the firm], as we estimate about $21 million needs to be paid in the second half of 2018.”
He added that since KrisEnergy has other successful operations in the Gulf of Thailand, the prospects for expanding the project beyond Phase 1A is likely.
While the notion of Cambodia being an oil-producing nation has been dogged by decades-long delays that saw major energy companies abandon the sector, Cheap Sour, director general of the General Department of Petroleum at the Ministry of Mines and Energy, said that KrisEnergy had made a monumental step to better the economy.
“For our economy as a whole, the government can get more revenue from its 5 percent share in Block A while also earning more revenue from taxes paid by the company,” he said.
Despite there being no contractual agreement that would require KrisEnergy to sell Cambodian crude to the country, he was optimistic that by 2020 the $1.62 billion oil refinery project being constructed by CambodiaPetrochemical Company in Kampot and Preah Sihanouk provinces would be fully online.
“If we don’t have oil refinery capacity by then we will export crude oil to be refined abroad, and this will not benefit everyday consumers,” he said. “However, when we can refine crude in Cambodia, prices for gasoline should be lower as we won’t have to import as much.”