Cambodia to ink revised oil contract with KrisEnergy

PHNOM PENH • Cambodia will sign a revised production-sharing contract this month with Singapore- listed explorer KrisEnergy to develop an offshore field that could finally produce the country's first oil after years of delays, a government official said yesterday.

Phnom Penh is revising some fiscal terms in the 2002 contract for the Cambodia Block A field in the Khmer Basin, after KrisEnergy became the sole stakeholder last year.

The government and the company declined to elaborate on the changes. "There will be an agreement signed in March," said secretary of state Meng Saktheara at the Ministry for Mines and Energy.

Cambodia has struggled to develop oil fields in the Gulf of Thailand, as few companies are willing to invest in the area following the 2014 global oil price slump.

KrisEnergy hopes to begin initially producing around 8,000 barrels per day of low-sulphur oil early next decade. But it first needs to find a partner to back the development, which is estimated at below US$200 million (S$280 million).

"We're not in a rush to farm things out. What we are looking for are good credible and stable partners that can share the risk and cost of the project," said Mr Kelvin Tang, KrisEnergy's chief operating officer and president of its Cambodia operations.

The company is likely to draw interest from state-owned companies or small-scale explorers backed by private equity, as global oil majors continue to sell mature or late-life assets in Asia, said Wood Mackenzie analyst Andrew Harwood. "While it still needs to be finalised, Cambodia employs a PSC (production sharing contract) regime, which compares favourably with other producing countries around South-east Asia, reflecting the current lack of activity and the need to attract upstream investment," he added.

He added that the project could be brought onstream by 2020 at the earliest, but would likely face a year or two delay due to the challenges facing KrisEnergy.

As its previous operator, US giant Chevron struck oil in the block a decade ago, but never started production due to disagreements with the government over final investment terms.

KrisEnergy bought Chevron's stake in the block in 2014. The remaining shareholders, Japan's Mitsui Oil Exploration and South Korea's GS Energy Corp, sold their shares to KrisEnergy last year.

Cambodia's government will take a 5 per cent stake in the oil block.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 21, 2017, with the headline 'Cambodia to ink revised oil contract with KrisEnergy'. Print Edition | Subscribe