Challenges loom over Cambodia’s oil future, experts say

Jose Rodriguez

Despite a rosy outlook for its oil industry, the Kingdom needs to face several issues as it moves further into the sector

Despite a rosy outlook for its oil industry, the Kingdom needs to face several issues as it moves further into the sector

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Cambodia might just be on its way to becoming a member of the highly-esteemed club of oil producing countries.

But industry experts say there are significant challenges that need to be overcome before the Kingdom’s potential is fully realised. These challenges fall within the realm of technical, logistical, financial and political.

A few months ago, it was reported that KrisEnergy Ltd of Singapore will start to extract oil offshore from the Apsara oilfield on the Gulf of Thailand before the end of 2019, a development that will make Cambodia the latest to join the long list of oil producing nations in Southeast Asia.

Cambodia’s neighbours, Indonesia, Malaysia, Myanmar, Vietnam, Thailand, and the Philippines have established oil industries whereas Singapore, which has no oil resource, hosts a large oil refining industry.

According to an article in the Diplomat, Angkor Gold Corp of Canada is negotiating with the government to explore 7,000 square kilometres of land in the Kampong Som basin, where sizable commercial reserves of oil are believed to be present.

While Cambodia’s proven crude oil reserves are not as huge as that of its neighbours, Cambodia is banking on it to provide a lift to the Kingdom’s economy.

Augustin Coppey, managing director of CEA Projects Co Ltd, says that challenges for Cambodia are also linked to market price, and how the government deals with oil companies.

Coppey has more than 20 years of experience working in the oil industry and related fields in Malaysia, China, Brunei, Thailand, Indonesia and Cambodia.

On the technical side, Coppey notes that much depends on the depth of the oil reservoir. When the reservoir is very deep, drilling will be quite difficult. As for market price, he says global oil price is volatile but high oil prices are usually good for countries that produce and export petroleum, and other oil products.

The issue revolving finance is that oil exploration and drilling activities require a large amount of money and it can be risky. “Oil companies must have a large budget. They should also be good at financial management,” he stresses.

The government, on the other hand, should maintain good relation with oil companies. “If you don’t have a good relationship with oil companies, they will go to other countries instead,” he states.

Cambodia should follow the example of Singapore. “In Singapore, though they might not ultimately approve the project, they will sit down and talk to you first,” he says.

Lack of trained manpower

PetroVietnam Oil International president and chief executive officer James Philip Coppola III says that there could be manpower problem in the future.

“This is a high-tech, high-value industry. Sourcing the right labour would be a challenge,” he says, adding that this problem is not unique to Cambodia though. Many oil producing countries, particularly those in the Middle East have to import engineers and other skilled people to explore and drill for oil, manage oil refineries, build pipelines, and perform complicated tasks related to the industry. Coppola says a lot of training is required.

Not big enough oilfields

PGS ASA vice president for Asia Jo McArdle says one of the hurdles for Cambodia is the size of the prospective fields. “It is not enough to attract larger international oil companies,” says McArdle, whose Norwegian-listed marine geophysical company provides seismic and 3D data that describes the subsurface beneath the ocean floor. Oil companies rely on this data to find oil and gas reserves.

According to the Economy and Finance Ministry, exploitable oil reserves in the Apsara oilfield amounts to 30 million barrels. “This is an opportunity for small to mid-sized oil companies to move into space,” she says.

Optimism abounds

However, despite the challenges, Coppey says he believes in Cambodia. “It’s difficult. It takes time. But the potential is there,” he states. Similarly, Coppola and McArdle see a “real opportunity” for Cambodia in the near future.

“We believe there is potential for larger economical discoveries and development for Cambodia but this requires regional high quality data with increased investment. It would have to be supported by larger oil companies, and this realistically can only happen if there is clarity on the OCA (Overlapping Claims Area) blocks in future,” McArdle says.

Cambodia is banking on the revenues it will get from the oil industry to help fuel its economy while creating jobs for locals.

 

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