Cambodia signs deal for first offshore oil field

On Wednesday, Cambodia signed an agreement with a Singaporean energy company to develop the country's first-ever oil field, the latest move in the impoverished nation's much-delayed plan to become a petrol producer.

KrisEnergy signed the agreement with the government in the capital, Phnom Penh, for a field in the Gulf of Thailand that could produce 8,000 barrels a day by 2020.

"This is a major step," Kelvin Tang, the chief operating officer of KrisEnergy, said during the ceremony. "It is Cambodia's first oil field."

Cambodian Energy Minister Suy Sem hailed the signing as a "historic event."

The Gulf of Thailand boasts significant oil deposits that have been exploited by Thai and Malaysian companies since the 1980s. Cambodia, however, has been slow to get in on the act, particularly as few companies are willing to invest in the area following the 2014 oil price slump.

'Sometime in 2019'

Chevron first found reserves in Cambodian waters in 2005. The kingdom was soon feted as Southeast Asia's next potential petrol state. Its government estimates that there are hundreds of millions of barrels of crude and vast reserves of natural gas off the coast.

But production stalled as the government and Chevron failed to agree on revenue sharing - leading the US oil giant to abandon the project and sell its stake to KrisEnergy in 2014.

"Shortly after signing, we will declare a final investment decision and proceed to deliver first oil in 24 months - sometime in 2019," CEO Tang said.

Under the deal, KrisEnergy will start extraction on one section of a 3,000-square-kilometer (1,160-square-mile) block known as the Apsara field to the southwest of Cambodia's coast. A single platform will be built, with plans for further platforms and the exploration of two more fields if the first becomes lucrative.

Risk of corruption

KrisEnergy holds a 95-percent stake in the first block, and the government gets the remainder. Cambodia, one of Asia's poorest countries, estimates that it will make at least $500 million (424 million euros) in royalties and taxes from the first phase of the project.

There are concerns that oil revenues could evaporate into Cambodia's notoriously corrupt bureaucracy. However, Finance Minister Aun Pornmoniroth said Cambodia was ready to learn from other countries' lessons and would not become oil-dependent.

"It will instead use oil revenue to fuel structural transformation to sustain economic growth," Pornmoniroth said. He added that the government was fully prepared to avoid the "resource curse."

sa/mkg (Reuters, AFP)