Cambodia’s First Oil Refinery Breaks Ground in Preah Sihanouk

Construction began on Thursday in Preah Sihanouk province on Cambodia’s first oil refinery, a massive $1.6 billion project capable of producing almost three times Cambodia’s domestic needs, the Mines and Energy Ministry announced on its Facebook page.

The refinery is expected to eventually have an annual production capacity of 5 million tons of oil—enough to satisfy Cambodia’s domestic demand, which was 1.8 million tons in 2015, and provide supplies for export, according to the ministry.

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The groundbreaking ceremony for the Cambodian Petrochemical Co refinery in Preah Sihanouk province, in a photograph uploaded to the Mines and Energy Ministry’s facebook page on Thursday.

The Cambodian Petrochemical Co. refinery will be built in two phases, the post says. The first phase of construction will end in mid-2019 on an investment of $620 million, and will be capable of producing 2 million tons of oil, mainly for the local market, it says.

Sino Great Wall International Engineering, a Chinese-owned company, will build the plant, which will have cost about $1.6 billion in total after the second phase is completed, according to Preah Sihanouk provincial governor Yun Min, who attended Thursday’s groundbreaking ceremony along with Mines and Energy Minister Suy Sem.

The refinery will be located on a 350-hectare plot in Prey Nop district’s Toek Thla commune, Mr. Min said. No timeframe was given for the second phase’s completion.

Chinese state-run Exim bank agreed to give a $1.67 billion loan to Cambodia in October 2013 to build an oil refinery in the same area, scheduled to be completed in 2018, The Wall Street Journal reported in 2013. Reached on Thursday, however, representatives from the ministry and Sino Great Wall did not know if this was the same project, and referred questions to the petrochemical company, which declined to comment.

Prak Samprathna, director of the provincial mines and energy department, said he had been promoted to his post in 2015 and was not knowledgeable about the project’s details.

In a speech at the ceremony, Mr. Sem, the minister, said crude oil would initially be imported from Middle Eastern countries, but in the future Cambodia’s own oil deposits off the coast of Sihanoukville would also supply the refinery.

It remains unclear how long the country will have to wait to extract its own crude oil. Cambodia’s only oil deposit, called Block A, has not produced any oil since U.S. giant Chevron began exploration in 2002. Following a protracted disagreement with the Cambodian government over taxes, Chevron sold its stake in the block to Singapore-based KrisEnergy in 2014.

Since then, delays and false starts have plagued the project. Ministry officials and KrisEnergy representatives told the Khmer Times in December that an agreement was expected to be inked in a few weeks. But no contract has emerged.

Then, in February, The Phnom Penh Post reported that KrisEnergy announced it was considering selling its stake in Block A to ease the company’s debt burden—a plan it eventually decided to abandon.

A Reuters report from March 20 quoted Mines and Energy Ministry spokesman Meng Saktheara as saying that an agreement would be finalized that month.

On March 30, KrisEnergy COO Kelvin Tang told the Post that the agreement was almost completed, and Mr. Saktheara said it was just a matter of “getting the paperwork done.”

No announcement of an agreement has been made since then. KrisEnergy representatives could not be reached on Thursday.

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