The government is courting several companies—including an enterprise run by the Egyptian owner of a posh London department store—to explore for oil and gas in the Tonle Sap lake basin, government officials said.
Mohammed Al Fayed, owner of Harrod’s of London, is also the owner one of at least five foreign companies now negotiating with the Cambodian government for the rights to drill near the lake, according to Te Duong Tara, director general of the Cambodian National Petroleum Authority.
“We are committed, but the companies, they are not yet committed,” he said. “We are still negotiating. It is still not yet clearly confirmed.”
Te Duong Tara said none of the drilling would take place in the lake, a Unesco biosphere reserve, which the government has excluded from oil and gas exploration. Because drilling would be away from the lake—perhaps as far as the Cardamom mountains of southwestern Cambodia—there would be no threats of environmental damage to the lake area, he maintained.
“We are also very concerned about our fish…and our temples,” he said, but added: “I don’t see any problems.”
Some environmentalists, however, are not as comfortable with the idea.
“The investment could be dangerous if Cambodia allows one of the world’s unique ecological habitats to be exploited for oil,” former Unesco environmental consultant Etienne Baijot said last year when the government was in the early stages of attracting petroleum companies. Even if the drilling is not in the lake, Baijot said, it could cause damage to the area. Tonle Sap lake and the surrounding watershed is one of the country’s crucial fish habitats and food-producing zones.
The incentive for the government is money. The drilling could potentially be highly lucrative for Cambodia, though any profits would likely be several years away.
It would be at least five to 10 years before a company was drawing gas and oil from the area, said Te Duong Tara, emphasizing the companies must conduct careful research before drilling. “If they make the wrong well and it is dry they will lose money,” he said.
If a company is awarded the right to explore an area, it must pay for the research, equipment and drilling. If oil or gas is found and a commercial operation is started, the government will share in the profits, Te Duong Tara said.
At least one of the companies, Harrods Energy owned by Fayed, is already working in the region. Last week Fayed’s company paid $4 million to buy out the Thai petroleum authority’s share of a concession in the Gulf of Thailand, according to an industry trade publication. Fayed is father of the late Dodi Fayed, killed in a car crash in Paris in 1997 along with Diana, Princess of Wales.
Prime Minister Hun Sen met with Fayed, accompanied by a former top Thai government official, at his Phnom Penh residence in March, said Eang Sophalleth, an aide to Hun Sen.
“The prime minister invited him to invest in Cambodia and asked him to look at the possibility of…oil and gas around the Tonle Sap,” Eang Sophalleth said.
He said Fayed has since sent a team to Cambodia to look into investment opportunities. The other potential bidders include companies from Norway, Russia, Singapore and at least two from the US. Some are only interested in researching potential reserves while others want to drill for oil and gas, Te Duong Tara said.
According to 1991 government regulations, one company can hold the rights to two blocks, which can range in size from 300 to 1,000 square km. Te Duong Tara said the government and the companies are now bogged down trying to negotiate the best contract terms for themselves.
Cambodia currently has no inland oil and gas wells. There are nine offshore wells. Gas or oil have been discovered in three, but in amounts too small to make them commercially viable, Te Duong Tara said.
Some of the interested companies want to begin oil and gas exploration within the next few months, Te Duong Tara said.
Groundwork has already been laid for drilling in and around the lake. The Japan National Oil Cooperation completed a massive $2 million aerial survey of the Tonle Sap basin in May 1999, which indicated the area could be rich in oil and gas deposits. Soon after, international companies began petitioning the government for the rights to drill there.
The possibility of drilling near the lake worries environmentalists, who say it could damage sensitive habitats that make the Tonle Sap region unique. The central area of the basin, for example, contains Southeast Asia’s only colony of spot-billed pelicans, along with other rare species of waterfowl.
At about the same time the aerial survey was being completed last year, Unesco was declaring the lake a biosphere reserve. The designation does not afford legal protection to the area, leaving the government free to sell oil and gas rights.
Minister of Environment Mok Mareth has said he most fears an oil spill, which could devastate animal and plant life in the area. He said last year the core areas of the reserve would remain off limits, though drilling in other areas could be allowed if the benefits far outweigh any harm that could be caused.
(Additional reporting by Chris Decherd)