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Kingdom to get 25% local oil

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A proposed platform that KrisEnergy plans to build in Cambodia’s offshore oil Block A in the Gulf of Thailand. Photo supplied

Kingdom to get 25% local oil

Companies processing petroleum from Cambodia’s oilfields are required to provide a maximum of 25 per cent to meet local needs, according to a law that has been signed off by King Norodom Sihamoni on July 12. It was passed by the Senate in late June.

However, petroleum exports can be banned in the event of an emergency shortage in local supply, states the Law on the Management and Production of Petroleum, a copy of which was obtained by The Post on Sunday.

The Post reported in May that KrisEnergy Ltd, the Singapore-based firm that operates Cambodia’s Block A offshore oilfield, has claimed the first drop of oil will be extracted late this year, with commercial production scheduled to begin next year.

The law has nine chapters, 72 articles and is “effective immediately”.

It details the authority tasked with managing production, environmental protection, punishments for negligent production and other concerns related to the processing of petroleum, as well as the nature of agreements.

The law divides production into “upstream” and “downstream” activities. Upstream activities include prospecting, research and development, and production.

Downstream activities include the treatment, transportation, stocking and trading of petrol products.

The Ministry of Mines and Energy will oversee the management of the sector and all activities therein. All individuals and legal entities seeking involvement in the sector must receive permission from the ministry.

All contractors must provide data regarding their operations to the ministry, the law states.

“Petroleum agreements must be valid for no longer than 30 years from the date of the agreement. Petroleum contractors can renew the validity of their agreements for a period of not more than 15 years,” Article 17 states.

Contractors that have been inactive for five years will have their contracts terminated as stated in Article 24, it adds.

Article 27 says contactors must negotiate with those in legal ownership of land before starting operations. They can request arbitration from the Ministry of Mines and Energy if no agreement can be reached with landowners.

Chapter 7 outlines punishments for breaking the law. These include the revoking or suspension of rights, the payment of compensation and imprisonment.

“Individuals who explore for, develop or produce petroleum without an agreement or if the agreement has been suspended face two to five years in prison and a fine of 100 million riel to 250 million riel ($25,000-$62,500)).

For legal entities, the fine will range from 4,000 million to 40,000 million riel ($1 million-$10 million), Article 58 states.

Contractors not abiding by technical and international standards and who affect the environment or society or cause death due to negligence will be fined between 400 million and two billion riel, it says.

“Those who provide data or information with the intention to cause public confusion or misrepresent the Ministry of Mines and Energy will be sentenced to between one and three years in prison with a fine of between 50 million and one billion riel,” the law states.

Social analyst Meas Nee said he was concerned by how rigorously debated the law would have been before being passed by the single-party Senate.

“A second concern regards implementation because legal enforcement remains weak in Cambodia.

“Like in the mining sector, an important resource could end up in the hands of some powerful people. It could be used as a tool to pressure those who criticise the management of the petroleum sector,” he said.

Kin Phea, the director of the International Relations Institute at the Royal Academy of Cambodia, said a transparent law in this sector was needed to ensure its effective management and to guarantee reliable revenue streams.

However, he disagreed with Nee on the nature of the law’s passing. He said beneficial laws could be passed without the participation of an opposition party.

“Generally speaking, the laws in Cambodia are good because they are passed after consultation with assistance providers and many development partners.

“However, it is questionable whether they are always implemented effectively, consistently and equally,” Phea said.

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