Chevron deal still unresolved as crisis impacts exploration

Written by Ros Dina and Steve Finch

Wednesday, 20 May 2009 Phnon Pneh Post

No reason given for delay in negotiations on deal that had been due for renewal last month, with govt still confident Cambodia will pump oil by 2013 at the latest. Photo by: Tracey Shelton A petrol station close to Phnom Penh's Central Market. The conclusion of negotiations on Chevron's new operating licence for Block A and energy exploration have been delayed. CAMBODIA is still to come to an agreement with Chevron over an extension to the American oil giant's licence agreement to explore offshore Block A, the company said Tuesday, with the government adding that the economic crisis had affected exploration activities. Gareth Johnstone, Chevron's Asia-Pacific media adviser based in Singapore, said Tuesday that negotiations were ongoing, despite the previous agreement having expired in April. "Chevron is in discussion with the Royal Government of Cambodia to extend the licence agreement for Block A," said Johnstone without elaborating on when the negotiations might be concluded. Chevron has already located up to six sources of oil in the 278-square-kilometre Block A in the Gulf of Thailand, Cheam Yeap, head of the Economy, Finance and Banking Committee of the National Assembly said Tuesday. The economic crisis had caused oil exploration to stagnate, but only for a short time, with activity returning to normal, he added. Joe Geagea, managing director of Chevron's Asia South Business Unit, told reporters Thursday in Bangkok that Cambodia and Chevron remained committed to getting the Kingdom's energy deposits to market, despite low oil prices and the economic downturn. "The question is, How do you do it in a way that meets our interests and their interests? And that's where we are continuing to have a dialogue," Bloomberg reported him as saying. Chevron previously said that fixed contractual agreements meant that when oil prices dropped there was little cost flexibility to maintain a certain level of profit, meaning that extraction had slowed in a number of its global concessions. It is not known whether government fees included in a future agreement are a reason for the delay in negotiations in the case of Cambodia. "For commercial and contractual reasons, we cannot release any information about these discussions," Johnstone said. Cheam Yeap told the Post that he planned to request that the government draft three laws related to the future realisation of the Kingdom's energy reserves - on oil control, oil tax and tax benefits within the energy industry - in a bid to better manage resources. London-based Extractive Industry Transparency Initiative had been invited to conduct up to four workshops to share experience on energy-resource management, he added. "We want Cambodia to be blessed by its oil resources and not to be cursed ... like Nigeria, Chad, Venezuela, Panama and some other African countries which had been poor before they had oil and have stayed poor after oil," Cheam Yeap said. Cambodia was still on course to pump oil from between 2011 and 2013, he added. Cheam Yeap said that other countries remained interested in Cambodia's oil deposits, namely Saudi Arabia, Kuwait, Indonesia and neighbouring Southeast Asian nations. There remained few major obstacles to further exploration of Cambodian energy reserves, he said, despite the continuing offshore demarcation dispute with Thailand. Cambodia has designated licences for offshore blocks covering 37,000 square kilometres, with a further 27,000 square kilometres still in dispute.