Chevron talks oil production

Thursday, 04 August 2011
Post Staff

Phnom Penh Post

Chevron Overseas Petroleum (Cambodia) has been actively exploring Cambodia’s offshore Block A, and applied for a permit to begin extraction from government authorities.
Yesterday, The Post caught up with its President Steve Glick, who has been in his present role in Phnom Penh for about three months, to discuss the company’s operations in the Kingdom, as well as the issues affecting the domestic oil and gas industry.
Edited for length by Tom Brennan.

Chevron Overseas Petroleum (Cambodia) President Steve Glick at the company’s Phnom Penh office yesterday. Chevron is the operator of Cambodia’s offshore petroleum Block A. Photo by: Sovan Philong

A girl stands near a stand displaying bottles containing gasoline along a street at the outskirts of Phnom Penh. Photo by: REUTERS

You’ve described the oil in offshore Block A in the Gulf of Thailand as difficult to reach, as it’s spread out across many smaller pools rather than collected in one large reservoir. Given that, is Block A financially viable as a production area for Chevron?

Certainly it has its challenges. It is relatively small, and it’s technically challenging to drill. So we need to be careful, and that’s the very reason why we’re pursuing this with a phased approach and one platform at first to see how it does. But we’re optimistic that we’ll come out okay for everybody and we can move ahead.

Prime Minister Hun Sen has called for oil production in Cambodia by December 12, 2012. Is Chevron on track to meet that deadline?
Well, let’s take a step back here. Since 2002, we’ve been here. Over that time period we drilled 18 wells, $160 million worth of investment …

As of August of last year, when we had drilled our last well, we felt we had enough information and we declared commerciality of the field. A month later, we submitted the production permit application to [the Cambodia National Petroleum Authority]. So since that time we’ve been working with the CNPA and the various government agencies to get a final investment decision on this project. We’re making progress.

I think we all need to understand that this is the first project for Cambodia. And for obvious reasons, everybody wants to do it the right way the first time. The government wants to make sure that they’re making the right decisions, and certainly we want to do a good job for them. So we’re all taking a major methodical approach to making this happen. Technically, Chevron’s ready to go … And we’re working through the remaining issues with CNPA with the target of getting a final investment decision this year.

If you are able to meet the government’s deadline of 12-12-12, what will that initial production look like?

Unfortunately, until we have a final investment decision our general policy is that we can’t divulge cost, production levels, or anything on any given project. Once that’s there, certainly we’ll give more details at our announcement for that investment decision.

You were supposed to receive the production permit from CNPA in the second quarter of this year. Has that happened yet?

We are waiting for two things: We are waiting for the production permit approval from CNPA. We do not have that yet. And then subsequent to that, we would go into a final investment decision.

What’s the ETA on that? Have you had any discussions with CNPA?
We’re working with them everyday.

Can you speak to the potential for changes to the tax regime that the Cambodian government has set up for you?

I can tell you what our expectation is: that we expect sanctity of contract to be in place, that we adhere to the rule of law, adhere to the agreements that are in place, and that includes Cambodia. So our expectation is that that will occur and that’s where we’re moving toward with regard to a final investment decision. I can’t comment on anything else that maybe the government is thinking about.

Wikileaks released cables from the US Embassy in Phnom Penh that claimed former Chevron General Manager for Exploration Gerry Flaherty had said Block A wasn’t a viable resource on its own. What is your reaction to those comments?

All I can say is that this is a conversation that supposedly happened many years before I got here. So I can’t comment on what was said, and I think we need to leave it at that. Our focus is today, and what we need to do to get our investment decision done by the end of the year.

So you do think Block A is financially viable?

Sure. We wouldn’t be here unless we felt like it was a development that Chevron could do with the government. There are some technical challenges associated with it. But certainly we believe that we can make a go of it. Time will tell as we get more information.

Among the first oil companies doing work here, how have you managed to navigate what is Cambodia’s well-known corruption problems?

First of all, Chevron is a member of the Extraction Industries Transparency Initiative, so we support their initiatives. It’s really up to the local host governments to give direction on revenue transparency. We will adhere to the letter of the law that’s in the host country. And we will certainly adhere to the tenets of what the EITI is trying to instill in Cambodia.

Reports have said some companies are downsizing their operations here as a result of Cambodia’s Anti-Corruption Law. Is Chevron affected in any way by that?
It’s an easy answer: We will comply. Whatever law is out there, we will comply.

But do you find any steps along the way difficult to get around because of the law? Any system of informal payments that puts Chevron in a difficult position?

When the law comes into effect and they enforce it, we don’t expect any problems.