Singaporean oil and gas exploration firm KrisEnergy on Wednesday signed economic and technical agreements with Cambodia for the country’s first oil field development, three years after buying out U.S. oil giant Chevron’s share of the block.
The deal, signed at Phnom Penh’s Sofitel Hotel to the sounds of clinking champagne glasses, paves the way for the long-awaited exploration of “Block A,” which is located about 120 km off the coast of Sihanoukville in the Gulf of Thailand.
KrisEnergy will now own 95 percent of the revenue interest—the government will own the other 5 percent—after Chevron relinquished its shares in 2014 for $65 million.
Chevron had owned the majority of the shares since receiving a license in 2002, though it failed to produce any oil.
Covering an area of 3,083 square km within Block A, KrisEnergy expects to produce 30,000 barrels per day once production starts, which is expected sometime in 2019.
At Wednesday’s signing ceremony, Finance Minister Aun Porn Moniroth said the government had recognized the need to diversify the country’s economy beyond Cambodia’s four biggest money-making industries of agriculture, garments, tourism and construction.
However, Cambodia would not allow itself to become oil-dependent, Mr. Porn Moniroth said.
“It will instead use oil revenue to fuel structural transformation to sustain economic growth,” he said.
Miguel Chanco, lead regional analyst for the Economist Intelligence Unit, said economic diversification wasn’t the only advantage of the exploration, as Cambodia had long been importing all of its oil.
“Cambodia will be less reliant on imports of oil, especially once the Chinese-backed refinery comes online, which means that imports will create less of a drag on headline GDP growth,” he said, referring to the Cambodian Petrochemical Co., which began construction in Preah Sihanouk province in May. It will be the nation’s first oil refinery.
“Simply put, the development of an indigenous oil and gas industry in Cambodia is more about energy security as opposed to a desire to become an oil exporter,” he added.
According to an information pack handed out at the signing, Cambodia could receive $500 million in total petroleum and tax income over the course of the project. “This amount will increase with any increase in oil price,” it adds.
(Additional reporting by Leng Len)