Executives at Singapore-listed energy firm KrisEnergy Ltd say they have settled terms with the Cambodian government and are ready to sign a long-awaited production-sharing agreement that would pave the way for the first-ever extraction of petroleum from Cambodian territorial waters.
Kelvin Tang, KrisEnergy’s chief operating officer and president of its Cambodia operations, said yesterday that a contract has been finalised that will govern the extraction of offshore oil and gas from the Block A oil field in the Gulf of Thailand. KrisEnergy holds a 95 percent stake in the 4,709-square-kilometre offshore block, while the Cambodian government holds the remaining 5 percent.
According to Tang, KrisEnergy and Cambodia’s Ministry of Mines and Energy have agreed to terms on a production-sharing agreement, “but everything is only set once all parties have signed the relevant agreements”. He added that the company was simply waiting for the government to call and set a date for the signing.
Tang said he could not disclose any details of the contract, citing confidentiality obligations required by the Cambodian government.
“Once the agreements are signed, our ability to disclose the terms will be subject to government approval,” he said.
American energy giant Chevron struck oil in Block A more than a decade ago but offloaded its 30 percent stake to KrisEnergy in 2014 after a lengthy dispute with the Cambodian government over tax-related issues that had thwarted the block’s development. Japan’s Mitsui Oil Exploration and South Korea’s GS Energy Corp sold their shares to KrisEnergy last year.
KrisEnergy, which posted $237.1 million in net losses for the 2016 fiscal year due to non-cash charges and higher financial costs, nevertheless increased net revenue by 137.3 percent to $142.8 million as a result of production from offshore oil fields in the Gulf of Thailand, the company reported in its annual filing.
While the firm previously indicated that it would consider selling or farming out a stake in Block A to ease its debt burden, Tang stated that any new transactions would “not adversely impact operations as KrisEnergy will remain the operator of the block”.
As for when the company would extract its first barrel from the block, Tang said the firm’s decision hinged on a host of factors, including a recovery in the price of crude oil, which is hovering around $50 per barrel.
Meng Saktheara, secretary of state at the Ministry of Mines and Energy, said the conclusion of the negotiations was a landmark achievement for the government seeing that it still has yet to pass a national petroleum law.
“This shows that despite not having a finalised law, we can manage to get an acceptable investment agreement done,” he said. “This agreement sets a precedent for all future oil extraction ventures.”
While he could not provide an exact date for when the production-sharing agreement would be signed, he remained confident that it was just a matter of days and promised full transparency.
“It is now just a matter of getting the paperwork done,” he said. “On the day we sign the agreement with KrisEnergy we will release the details of how the revenue sharing model will work because it is important for future investors looking at Cambodia’s oil potential.”
Saktheara added that once the company declares its final investment decision (FID), extraction could begin in 28 months “providing everything goes smoothly”, he said. That could see oil flow as early as mid-2019.
Despite KrisEnergy’s financial woes and persistently low global crude prices, he was confident that the company could find a partner to help develop Block A. The offshore block is believed to hold 700 million barrels of oil as well as 3 trillion to 5 trillion cubic feet of natural gas, with an estimated production capacity that could reach 10,000 barrels per day.
“It is general practice for a company to farm-out parts of its operations,” he said.“We will just have to approve the partner once KrisEnergy presents one to make sure the government receives the same benefits from our natural resources.”