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PM says oil giant must produce

PM says oil giant must produce

PRIME Minister Hun Sen warned Tuesday that US energy giant Chevron could lose rights to explore offshore interests if it does not produce oil by the end of 2012.

Speaking at the closing of a Ministry of Agriculture, Forestry and Fisheries conference, the premier said the Cambodian government has ordered Chevron to get petroleum production under way or face termination of its contract.

“We have set [a deadline for] the Chevron company to reach oil production by the end of 2012; otherwise we will cancel the contract ... [if] negotiation has not been reached,” Hun Sen said in front of several hundred government officials gathered at the Faculty of Agriculture, on the outskirts of Phnom Penh.

Chevron owns a 30 percent stake in Block A, a 4,709 square-kilometre area in the Gulf of Thailand. Lying about 120 kilometres from shore, the concession is widely considered Cambodia’s best chance of pro-
ducing energy within the next few years.

The government first awarded contract-sharing agreements covering Block A in August 2002 to energy companies Chevron, Moeco Cambodia Co and GS Caltex.

Chevron initially owned a 55 percent stake in the concession, but the multinational is believed to have sold a 25 percent stake in the block to Singaporean-based company KrisEnergy in February.

Production deadlines have routinely changed since operations started on the block, which Chevron officials described in February last year as a “complex reservoir” that posed a “challenge”. However, following Hun Sen’s warning, Chevron has been keen to emphasise its willingness to cooperate with the government.

“We are aligned with the Royal Government of Cambodia’s desire to see production from Block A as soon as economically possible,” Chevron spokesman Gareth Johnstone told the Post by email Tuesday.

“The first oil date is reliant on a successful exploration programme, and is dependent on achieving key milestones,” he added.

Johnstone did not to elaborate on what such milestones could be and did not comment on whether the 2012 deadline was a realistic target.

Over the past 12 months, the relationship between Chevron and the government has been the cause of much speculation.
It took months of negotiation for a deal on Block A exploration rights to be renewed after a previous agreement ran out in April last year, prompting speculation that Chevron may pull out of Cambodia.

Johnstone said Tuesday that the extension deal, reported by the Post in January, was drawn up for an undisclosed sum in exchange for an obligation to drill three exploratory oil wells.

According to Chevron’s annual report for 2009, the extension runs “to the third quarter 2010”.

“Information gained from the drilling program is expected to provide improved definition of the resource in the block,” Johnstone wrote. He added that Chevron is continuing to evaluate the “commerciality” of its Cambodian prospects.

Chevron’s overall financial performance has suffered as the economic crisis caused oil prices to plummet last year.

In January, the company posted fourth quarter earnings of US$3.07 billion, down 37 percent on the previous year.

An interim update on its first-quarter earnings is due Thursday.

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