20 March 2017, Phnom Penh/Singapore — 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.
Cambodia is revising some fiscal terms in the 2002 contract for the Cambodia Block A field in the Khmer Basin after KrisEnergy Ltd 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,” Meng Saktheara, a secretary of state at the Ministry of Mines and Energy, told Reuters.
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-sulfur oil early next decade. But it first needs to find a partner to back the development, which is estimated at below $200 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 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 international oil majors continue to sell mature or late-life assets in Asia, Wood Mackenzie analyst Andrew Harwood said.
“While it still needs to be finalised, Cambodia employs a PSC regime, which compares favorably with other producing countries around SE Asia, reflecting the current lack of activity and the need to attract upstream investment,” he said.
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, U.S. oil 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 Co Ltd and South Korea’s GS Energy Corp [GSHOLE.UL], sold their shares to KrisEnergy last year.
Cambodia’s government will take a 5 percent stake in the oil block.
*Prak Chan Thul & Florence Tan; Editing by Randy Fabi – Reuters