Oil and gas reserves no salve to economic crisis: senior minister

Written by CHUN SOPHAL AND NGOUN SOVAN

Tuesday, 04 November 2008 Phnom Penh Post

With no confirmation of the size of Cambodia's oil and gas reserves, government officials say the impact of petroleum discoveries on the local economy is still unknown Photo by: RICK VALENZUELA A man filling a petrol container in Phnom Penh. THE government is not banking on the Kingdom's untapped offshore oil and gas reserves to get them through difficult times, officials say. "We want Cambodia to benefit from its oil reserves as soon as possible, but we should not rely on anything that is difficult to control and that we have not yet seen with our eyes," Keat Chhon, minister of economy and finance, told the Post Monday. "What we have to strive for is to diversify our economy by strongly promoting the agricultural sector, increasing the manufacture of value-added products via processing before exporting and not expect substantial benefits from oil," he said. The minister did not provide revised figures on the size of the potential deposits or on the companies' operations. The comments come despite Prime Minister Hun Sen last week urging Chevron and its Japanese partner Mitsui Oil Exploration to accelerate efforts in Cambodia. Te Duong Tara, the director of the Cambodian National Petroleum Authority (CNPA), refused to answer questions about the government's purportedly revised expectations for the petroleum sector. In March, he said the government had hoped to begin producing kerosene by 2011. The government must decide soon on how best to develop the country's oil. He added in the earlier interview that the size of the oil reserves had not yet been confirmed due to the complex geological undersea environment. Chevron began gas and oil exploration in the Gulf of Thailand in 2002 through a partnership with Mitsui. The company announced in 2005 it had struck oil in four of 15 test wells drilled about 150 kilometres off the coast from Sihanoukville. Since that time, estimates of Cambodia's oil reserves have varied from between 50 million and 500 million barrels and about two trillion cubic meters of natural gas. Sam Rainsy Party lawmaker Son Chhay warned Monday the government must establish a legal framework for the country's nascent oil and gas industry. "I think the government must decide soon on how best to develop the country's oil resources but if it does not have legislation in place, there will be no benefits for the nation," he said. According to Son Chhay, the revenue generated from the Kingdom's oil and gas reserves should not go directly into the national budget. Instead, he proposed the creation of a separate "oil fund" to manage the cash. Oil funds have been created in other developing nations with large reserves and weak institutional frameworks - such as Chad - as a means of combatting corruption. Cambodia Institute of Development Study President Kang Chandararot told the Post Monday that neither the government nor the private sector have provided clear data on Cambodia's oil and gas potential. "I think it's too early to consider benefits from oil and gas," he said. "It would be good for the economy, as long as proceeds were used equitably." In 2007, the International Monetary Fund produced a "moderate economic scenario" that estimated hundreds of millions of barrels of recoverable oil in Cambodia, and three times as much natural gas. According to the IMF scenario, income generated by estimated reserves would start at about US$174 million per year by 2011 and peak at $1.7 billion per year by 2021. Chevron could not be reached for comment. ADDITIONAL REPORTING BY GEORGE MCLEOD