Cambodian Journalists Alliance Association

Cambodia extracts first crude oil from Thai Gulf after years of delays

A view of oil extraction facilities being operated by KrisEnergy and the Cambodia government in the Gulf of Thailand. KrisEnergy
A view of oil extraction facilities being operated by KrisEnergy and the Cambodia government in the Gulf of Thailand. KrisEnergy

Cambodia has begun extracting its first crude oil from the Gulf of Thailand – a development that Prime Minister Hun Sen called a “blessing” as observers demanded transparency over revenue in order to avoid the “oil curse” that has riled other major producing nations.

The first drop was extracted from the “Block A” concession on December 28, according to Singapore-listed firm KrisEnergy, which will operate the off-shore operation in a joint venture with the government.

“Although we are not as happy as in previous years because of COVID-19, we have received a big gift for our nation, the first oil produced in our territory for 2021,” Prime Minister Hun Sen wrote on his Facebook page on Tuesday morning.

“The start of this oil production is a blessing for the people and the nation, not a curse as claimed by some prejudiced people.”

KrisEnergy in 2017 signed an agreement with the government to develop the 3,083-sq-km “Block A” after buying Chevron Corp’s operating interest in the block for $65 million in 2014 following years of false starts for Cambodia’s nascent oil sector.

“[T]here has been a steep learning curve for all involved in what is a momentous event for the Cambodian people and an important strategic and operational milestone from KrisEnergy,” Kelvin Tang, CEO and president of KrisEnergy’s operations in Cambodia, said in a statement on Tuesday.

Production is expected to reach a peak rate of approximately 7,500 barrel of oil per day once the drilling program is completed in mid-February 2021, the company said.

KrisEnergy holds a 95 percent stake in the project, with the government holding the remaining five percent.

Observers called for complete transparency in order to avoid the “oil curse,” a political and economic dysfunction caused largely by poor management of oil revenues in major producing countries.

“People are afraid that the revenue will be used incorrectly and fall to a handful of influential and powerful people,” said San Chey, executive director of the Affiliated Network for Social Accountability.

The “oil curse” was most common in non-democratic countries, where authorities do not rely on people’s votes to stay in power, said Ra Chanroat, manager of Transparency International Cambodia’s Mining for Sustainable Development program.

“Instead, they sometimes use resource revenues to buy legitimacy,” he said. “A government without democratic systems lacks mechanisms for citizens to hold public officials to account,” he said.

Cambodia has said it is ready to rekindle negotiations with Thailand on oil and gas development over the long-contested 26,000 square kilometer Overlapping Claims Area (OCA) in the Gulf of Thailand.

During the 37th Asean ministerial meeting on energy on Bangkok in 2019, the two countries agreed to reopen negotiations, but talks have since been delayed by the COVID-19 pandemic.

A memorandum of understanding to jointly explore the area was signed in 2001 but was later shelved by the Thai government in 2009. The OCA is estimated to hold up to 500 million barrels of oil and gas deposits under the seafloor.

Cambodia’s first oil exploration deal was signed in 2002 with the US-based Chevron. In 2010, Chevron’s local subsidiary, together with LGCaltex Oil Corporation and Mocco Cambodia Co., Ltd, announced the discovery of Cambodia’s first commercial oil field and intention to begin extraction in 2012.

However, the companies withdrew in 2014 and 2016 after being unable to reach an agreement about revenue sharing with the government.