Cambodia's Slow Road to Become an Oil Producing Nation

Cambodia's Slow Road to Become an Oil Producing Nation

The Cambodian government and Singaporean energy giant, KrisEnergy have
penned a long awaited deal to begin the development of an offshore oil
field. Delays have hampered the deal over the last six-years, but KrisEnergy
can now begin the development of 3,083 square kilometres in the Khmer basin.
The project will earn the Cambodian government around US$500 million over
its life.

The KrisEnergy Chief Operating Officer Kelvin Tang outlined the group's aim
of delivering the first barrel in 2019. "Shortly after signing, we will
declare a final investment decision and proceed to deliver first oil in 24
-months", he said. Cambodian Finance Minister, Aun Pornmoniroth disclosed
that the development would produce around 30 million barrels of oil for
Cambodia over a nine-year period.

Why has the deal taken so long to come to fruition?

Cambodia has struggled to find a partner willing to help them develop oil
production facilities in the Khmer basin. The global drop in the price of
oil caused many companies to limit investment in the development of new oil
fields.

Unhelpful business laws in Cambodia also made the country a difficult place
to do business. But this deal is an indication of Cambodia's progress in
this regard. Hun Sen's government implemented 45 business reforms nationwide
in 2016, including allowing the credit bureau to provide credit scores to
banks and financial institutions, giving more access to credit information.
There is still some way to go as company registration is still a
time-consuming process, but this deal shows headway in promoting Cambodia as
a more welcoming and accessible business environment.

The deal still has to wait for the approval of the draft petroleum bill

The Cambodian government now needs to draw up a draft petroleum bill and
submit it to the Council of Ministers for approval. This process will likely
last until the end of 2017 or the beginning of 2018, but once it is
approved, work on the Khmer basin can begin in earnest.

The weight of KrisEnergy behind the deal is also a valuable asset. The
company is well established in the industry and already hold oil field
acreages of more than 43,000 square metres in Bangladesh, Cambodia,
Indonesia, Thailand and Vietnam.

Singapore also has the largest refining centre in the region, and their
delivery prices set the benchmark throughout the industry, making the
country the perfect business partners for the Cambodian government.

The benefits for Cambodia could go further than purely financial gain

Despite the handsome sum of US$500 million and the savings Cambodia will
make by producing their own oil rather than relying on oil imports, the deal
could also represent a new era for Cambodian business.

Cambodia needs to get tough on corruption and stamp out corporate graft;
this needs to come from all levels of business, not just top down. Major
cooperation with a large company from Singapore, where there is a
zero-tolerance approach to corporate graft, could fuel modernisation and
anti-corruption efforts in Hun Sen's Cambodia.

This opens the door to more opportunities

It is a landmark deal for Cambodia. Not only does it put them further on the
road to becoming an oil producing nation, but it opens the door for plenty
of new business opportunities. If the agreement yields results for
KrisEnergy, we can expect to see more investors looking to Cambodia for oil
and gas investment.

Petroleum Authority of Thailand (PTT) and the Cambodian Ministry of Mines
and Energy quickly signed a deal in early August. According to the deal,
Thai energy giant will share technical knowledge and technology for the oil
and gas industry with the Cambodian government.

Secretary of State for the Ministry of Mines and Energy, Meng Saktheara
said: "Cambodia also expects to attract more investment from Thailand in its
fledgeling oil and gas sector".

Thai companies will undoubtedly want to assess the capabilities of
Cambodia's oil and gas reserves in the wake of the agreement with
KrisEnergy, and PTT will probably be at the head of the pack. By 2020 the
company wants to increase the number of petrol stations it operates in
Cambodia to 90 from the current level of 35.

KrisEnergy is already eying future developments. The current plans only
apply to Apsara block A, but according to Kelvin Tang, "there remains
further potential in other geological trends within the contract area for
future investigation".

The agreement pushes Cambodia into unchartered territory, it will pave the
way for the growth of the oil and gas industry and could drive a gradual
cleansing of Cambodian business practices. With more doors opening, we can
expect the bright lights and traffic and Phnom Penh to run on Cambodian oil
in the not so distant future.

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Link to Original Article:
http://www.aseantoday.com/2017/09/cambodias-slow-road-to-become-an-oil-produ
cing-nation/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com