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Oil Exploration Deals Face Review

Oil Exploration Deals Face Review

Interim Energy and Mines minister Ing Khiet said the new Cambodian government would

review oil and gas exploration contracts signed by the former Phnom Penh-based administration.

"We must respect the national interest of the Cambodian people and obviously

energy is going to be a very important sector in the future of Cambodia," he

said.

The former Hun Sen-led regime awarded contracts to five foreign companies to explore

zones off Cambodia's southern coast.

Industry insiders said any review of the contracts is likely to focus on Maritime,

a consortium which groups Marimex and Technitrade International, two Dutch companies

backed with Romanian government money. Maritime was awarded two offshore blocks and

one onshore zone last December but has yet to begin work.

Questions have been raised about Maritime since it specified itself as a transport

company in its contract and opted for an onshore block deep in Khmer Rouge territory

in the northwest of the country.

Maritime has yet to open a representative office in Cambodia and could not be contacted.

Khiet, who is expected to retain control of the energy portfolio when a constitutional

government assumes power on Sept. 15, declined to single out any of the existing

contracts.

The former Phnom Penh government also awarded contracts to two consortiums led by

UK-based firms Premier Oil and Enterprise Oil, and another to Campex which is headed

by the Japanese National Oil Co. A fifth contract was awarded to Hungary's Nawa Oil

in a deal widely viewed as a political arrangement between the former communist leaders

of the two countries. The offshore block is being re-offered after Nawa failed to

meet contractual deadlines to begin exploratory work.

Campex and Enterprise officials said they would welcome a review of their contracts

and were prepared to sit down and discuss the deals with the new government.

"We have absolutely no problem with an examination of our contracts because

we believe they will stand the closest scrutiny because they are based on international

norms," said Barry Rogers, General Manager of Enterprise Oil in Cambodia. Premier

Oil is based in Singapore.

Khiet said that since FUNCINPEC won May's general electio, there had been renewed

interest in the on-shore zones.

Before the election, the centerpiece of a $2 billion international effort to bring

peace to war-ravaged Cambodia, security concerns had scared off prospective investors.

To date, no seismic line, geomagnetic or gravity surveys of any meaningful size have

been undertaken on the shore zones.

"We shall proceed very soon with the onshore zones. We have several companies

that are interested but I cannot name them," Khiet said.

The minister said the new government would also seek to redraw the boundaries for

zones which overlap Cambodia's landmark and ecologically pivotal Tonle Sap lake.

"We want to avoid the possibility of an accident during drilling. An oil spill

on the Great Lake would be devastating, it would wipe out fish stocks and devastate

the environment of the whole country," he said.

Campex general Manager Seiji Ikeda, said his company expected to spud their first

exploratory well on December1 and said the would know the results within three monts.

Rogers said Enterprise would follow within weeks adding the company had so far been

"very favourabley impressed by geo physical studies" already made.

"Our initial assesment was that there was slightly more chanve of finding gas

than oil but today I would say it is about 50-50," he said

Only three previous wells have been sunk in the continental shelf off Cambodia, back

in the early 70s by Elf and Esso. Those wells were drilled on regional highs along

the Cambodian shelf. Oil experts said new data drawing on comparisons with the geology

of the neigboring Pattani basin in Thai waters suggested the early attempts had been

misdirected.

Khiet, who was a member of Prince Sihanouk's cabinet in the early 60s said the government

would also consider granting tax concessions on the importation of equipment used

for exploratory work. The issue has been a source of dispute between the foreign

oil firms and the government since they began work in Cambodia in 1991.

"If they find oil they will have to pay tax before they sell it so I suppose

we can recuperate our revenue then," he said.

Khiet predicted Cambodia would have a huge demand for oil and oil products in the

coming decades as it attempts to rebuild itself after decades of war. He singled

out asphalt which will be needed in huge quantities to repair some 4,000 kilometers

of ruined roads.

"We will be looking to our neighbors to help, particularly Thailand, Malaysia

and Indonesia. Hopefully they will offer us friendship prices," he said.

Cambodia's oil potential remains for the most part unknown and its offshore fields

unexplored, but this has not stopped politicians and government officials in the

past from making grandiose claims about what an oil discovery could do for the country.

Dr. Long Bora, who led the unsuccessful Cambodia Free Independent Party in the election

had promised voters he would turn Cambodia into a second Kuwait, and painted a picture

of a future where the population could give up farming and live off state oil revenues.

Experts say he may have been overstating the case.

"There is a tremendous misconception about what oil and gas can do for an economy,"

said Rogers citing a study by the East West Institute in Hawaii which calculated

potential future revenues to the governemt might by worth U.S. $175 million a year.

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