Low oil prices set to delay Chevron

Written by NGUON SOVAN and CHUN SOPHAL

Thursday, 19 February 2009 Phnom Penh Post

FALLING oil prices are likely to delay Chevron's development of Block A, a finance official said Wednesday, adding that the oil company had already finished exploration of the offshore concession, but would not begin production until at least 2012. Hang Chuon Naron, secretary eneral at the Ministry of Economy and Finance, said in a forum on trade and investment Wednesday that Chevron was now playing a waiting game in Cambodia after seeing oil prices plummet in the past six months. "At this stage, Chevron has finished exploration in Block A. If they decided to move on with development now ... [first] production would be in 2012," he said, a scenario he predicted would generate oil revenues of $200 million the same year. However, Hang Chuon Naron predicted Chevron would wait longer to begin oil production from the Gulf of Thailand concession "because the oil price is in crisis". "Therefore, production will be in 2014 or 2015 - that depends on the oil price," he added. "Everything depends on the price." Hang Chuon Naron's assessment of Chevron's activities in Block A represent a further blow to the company's prospects of developing Block A in the near future. On February 5, Chevron's Asia Pacific spokesman Gareth Johnstone told the Post that the oil company was "working hard to find a solution to develop the complex reservoir". He added: "We are in the process of evaluating several development options for the Block A resource to overcome this challenge." Johnstone made no mention of world oil prices and the impact they were having on the development of Block A. The world crude price was just $34.92 a barrel at 2pm on Wednesday, down from July's record high of $145 a barrel. "Chevron is not in a position to discuss startup dates until the evaluation process has been completed," Johnstone added in this month's statement. He refused to comment further on Wednesday. Economic analyst Chan Sophal, president of the Cambodia Economic Association, said Wednesday that the oil price was unlikely to remain deflated for more than "one or two years". Chevron would likely begin production at this time, he suggested. "I think that the law and environment is favourable for investors in this industry [in Cambodia], but now they may not be sure about the market," he said. Having already established the existence of deposits in Block A, Chevron signed a Joint Study Agreement with the Cambodian government in July 2006 announcing plans to drill five wells in 2006 and five more in 2007 following an exploration campaign that ended in 2005 covering 2,428 square kilometres - a little over one-third of the area of the whole concession. Chevron owns 55 percent of Block A, while Moeco Cambodia Ltd owns 30 percent and GS Caltex Corp the remaining 15 percent.