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Oil deal finally gets signed

Sok Chan / Khmer Times Share:
Kelvin Tang, left, president of KrisEnergy Cambodia, and Mines and Energy Minister Suy Sem at the agreement signing ceremony. KT/Chor Sokunthea

The Cambodian government and Singapore-based oil and gas company KrisEnergy officially signed an agreement yesterday, after a substantial delay in negotiations, for the extraction of petroleum from Block A to develop the Aspara oil field.

The petroleum agreement for offshore oil development will open a new era for Cambodia to become an oil producer and will lead to more intense exploration works in the remaining five out of six offshore blocks and 18 onshore blocks.

Economy and Finance Minister Aun Pornmoniroth, said that the signing of the agreement with KrisEnergy was “the starting point of a very long journey which requires participation from all related parties to realise the production of the first drop of oil in Cambodia”.

According to KrisEnergy’s development plan, oil from Phase 1A can be expected in two years which will be in late 2019 or early 2020. Under this agreement, the company needs 60 days to obtain the final investment decision followed by a period of two years to set up the infrastructure to produce the first oil flow.

“The government will continue to provide support and facilitation to overcome all barriers to issue the necessary documents for the Block A investment project – in line with the regulatory framework and incentive scheme – to ensure the project will succeed as planned,” Mr Pornmoniroth said.

Likewise, he said the company must fulfil all of its obligations stipulated in the Block A agreement package.

Mr Pornmoniroth said the agreement package for the development of Block A will enable the company to start its first oil production in phase 1A and phase 1B and move on towards the appraisal as well as the development plan for phase 1C.

“It is estimated that phase 1A and phase 1B will provide more than 30 million barrels over the period of nine years,” he said.

Kelvin Tang, the president of KrisEnergy Cambodia, said that the company plans to produce oil by late 2019.

Though the current price of oil is low, Mr Tang said the company’s final investment decision was made on prevailing prices.

Cambodia Block A covers an area of 4,709 square kilometres in the Gulf of Thailand over the Khmer Basin, approximately 150 kilometres from Cambodia’s mainland where water depths range between 50 and 80 metres.

The Cambodian Ministry of Mines and Energy – the successor agency to the Cambodian National Petroleum Authority – intends to exercise its right to acquire a 5 percent working interest in Cambodia, which when completed will reduce KrisEnergy’s combined holdings to 95 percent.

“The 5 percent share of the Cambodian government with KrisEnergy is to help the government establish a participating interest. It is to allow them to sit just across the table not as regulators but also as partners,” said Mr Tang.

“I think if KrisEnergy gained a 100 percent share, the government would still able to reap the benefits of oil production from taxation, royalty, and profit and cost sharing,” he added.

An agreement to transfer 28.5 percent and 14.25 percent working interest in Cambodia Block A from Mitsui Oil Exploration Co. Ltd and GS Energy Corporation, respectively to KrisEnergy, was signed on August 31, 2016 and completed on October 7, 2016.

Ministry of Mines and Energy secretary of state Meng Saktheara said recently that both sides had spent a long time making their revisions before the agreement.

Mines and Energy Minister Suy Sem said that the agreement for offshore oil development in Block A was important for Cambodia’s development.

“The oil business will be a major new impetus for social advancement, human resource development and building Cambodia’s competitive edge in international markets,” said Mr Sem.

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