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Deal offered to unlock oil-rich waters

Deal offered to unlock oil-rich waters

CAMBODIA has offered a deal to Thailand to break a 24-year territorial dispute

that has prevented a potential $15 billion off-shore oil and gas bed from being

explored.

The deal, announced by Industry, Mines and Energy minister Pou

Sothirak on Jan 19, proposes that both countries put aside sovereignty claims

over part of the Pattani Trough in the Gulf of Thailand.

Sothirak said

that "on the verbal consensus of both [Cambodian] Prime Ministers", Cambodia was

prepared to "get together 50/50" with Thailand to exploit the area's natural gas

and oil reserves.

The Cambodian proposal - the first positive sign of

movement since the area was "frozen" under respective sovereignty claims in 1971

- could meet with a speedy and positive reaction from the Thais.

Thailand

has recently struck a precedent deal with Malaysia on an off-shore block that

had been disputed for 20 or more years between those two

countries.

Though neither Malaysia nor Thailand dropped sovereignty

claims, they managed to strike a complicated deal that will allow each to

jointly explore the area and share profits.

Sothirak said that both

Prince Norodom Ranariddh - who it is understood first mooted the deal with Thai

Foreign Minister Thaksin Shinawatra some months ago - and Hun Sen agreed there

should be joint exploration of the area.

"We will not talk about

territorial integrity but instead economic integrity," Sothirak

said.

Cambodian officials are convinced that Thailand is willing to enter

discussions on such a joint venture. "We are thinking of moving very fast," said

one, "we don't want this kept waiting."

The deal has yet to be put

formally to the Thai government.

United States oil explorers Triton, a

Dallas-based company that helped broker the Thai/Malay deal, has been courting

the Cambodians to develop the area.

Large parts of the disputed area lie

between claims either proven or potentially rich in hydrocarbons.

On the

Thai side to the west, US company Unocal has been producing from one gas field

for ten years and recently announced that royalties it has paid to the Thai

government during that time have reached $1 billion.

On the eastern

Cambodian side, Enterprise Oil has completed wildcat wells and seismic survey

work on two blocks that according to reports appear encouraging.

Triton

seismic maps show that some of the huge Thai gas reserves being worked by Unocal

also appear to extend into the disputed block. Potential areas showing "seams"

of oil reserves also appear in the disputed block, especially to the

north.

Triton analyst Paul Dailly said that the disputed waters - about

three times bigger in area than the recently resolved Malay/Thai claim - could

yield anything from three to eight trillion cubic feet of gas and

oil.

Based on improved technology, the Pattani Trough fields could move

from discovery to production in five years. Recent history shows that such

movement usually takes eight years, Dailly said.

Triton senior commercial

analyst Scott Davis said that in the first 18 months an exploration company

would spend up to $30 million completing studies and drilling wildcat

wells.

During the year long appraisal following a discovery, $34 million

more would need to be spent measuring reservoir sizes and adjusting drilling

methods.

The bulk of the "risk capital" - $1,200 million - would then be

spent designing and building rigs and finalizing engineering contracts. Neither

the Thai nor the Cambodian governments would be liable for those costs.

A

field yielding two trillion cubic feet of gas would net $2.8 billion, of which

Cambodia would get just under half in royalties, profit share and taxes; while

the exploration company would get 57 percent in cost recovery and profit share,

he said. The Thais would profit similarly, he said.

The Pattani Trough

could therefore produce $3.5 billion for Cambodia, at between $150 million and

$200 million a year, Davis said. There would also be indirect benefits, such as

infrastructure work and employment, he added.

Enterprise Oil Cambodia

general manager Barry Rogers, in a speech to a oil industry seminar in Singapore

on Jan 20, said the disputed Pattani Trough block would "no doubt" attract

interest when the territorial claim was resolved.

Rogers also said a

second offshore block now disputed between Cambodia and Vietnam as likely to

attract interest from multinational companies.

Rogers said that the

success of three of the first four wells drilled in Cambodian waters by

Enterprise, Campex and Premier boded well for the future, though more money had

to be spent to learn more of the potential.

He said more exploration

activity was likely in the Cambodian blocks already being worked. An on-shore

production facility was likely to be built within the next five

years.

Sihanoukville port would need more money spent on it, but

associated benefits in medical facilities, helicopter support, fuel supplies,

accommodation and catering would follow.

Rogers said Cambodia had to date

had a remarkably successful re-entry into the petroleum exploration sector.

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