After KrisEnergy announced its purchase of Cambodia’s only offshore oil reserves from Chevron for $65 million on Monday, the Singapore-based company said Tuesday that its success in extracting oil—something Chevron failed to do during its decade in control of the underwater block—hinged on negotiations with the government.
Chevron’s own efforts to negotiate a workable deal with the government fell apart in 2012 after the U.S.-based oil giant rejected a 30 percent corporate income tax, leading to a two-year standoff that ended in this week’s sell off.
KrisEnergy’s purchase of Chevron’s 30 percent share of Block A, a 4,790 -sq-km area off the coast of Sihanoukville believed to potentially yield 10,000 barrels of oil a day, gives it control of the block with a 52.25 percent participating interest.
Despite the move, which included a deposit of $6.5 million in cash, the completion of the acquisition is subject to permission from the Monetary Authority in Bermuda, where Chevron is incorporated, and acknowledgment from the Cambodian government. Until then, KrisEnergy says it cannot give an estimated date of extraction, though the company says it is ready to proceed.
“We cannot give a precise date as this depends on discussions with the Cambodian authorities to finalize the production permit application,” said Tanya Pang, head of investor relations at KrisEnergy.
“However, once approvals are received and the partners are able to agree and declare final investment decision, we estimate that development to first oil production will take approximately 24 months.”
“As we have only recently signed the agreement with Chevron, we have not yet held any discussions with the Cambodian authorities but we plan to initiate talks as soon as the transaction is acknowledged by the government,” Ms. Pang said via email.
Officials from the Ministry of Mines and Energy and Cambodian National Petroleum Authority declined to comment on the deal.
Chevron failed to reach the extraction phase of its plans for Block A because of a dispute over the original contract that both parties signed in 2002 based on regulatory documents from 1991, which states that oil companies should pay just 25 percent tax on earnings. But that regulation was changed in 1997, requiring a 30 percent corporate tax, which Chevron rejected upon review.
Kim Natacha, executive director of Cambodians for Resource Revenue Transparency, said KrisEnergy’s acquisition before any negotiations have been made with the government is “very risky.”
“There is not a lot known about them. The only information we have is from their website,” she said. “Hopefully they will be open about plans and progress so Cambodian people and civil societies are not kept in the dark.”
Chevron exits its investment in Block A after having spent more than $160 million on the venture and drilling at least 18 test wells. According to Chinese state news agency Xinhua, Deputy Prime Minister Sok An said in 2012 that Chevron needed to invest an additional $600 million to successfully pump oil from Block A.
But despite its costly and ultimately fruitless venture, Alex Yelland, global media adviser at Chevron, said in an emailed statement that the company is proud of its achievements in the country.
“Chevron is pleased to have been involved in the development of the Cambodian oil and gas industry, and are proud of having made new oil discoveries in Block A over the last 12 years,” he said.
