In 1998, after poking around for seven years, the four foreign oil firms that had drilled a total of nine wells in potential oil and gas fields off Kompong Som walked away from their investments in Cambodia.
The reason was simple. They hadn’t found much oil, and the world oil price had fallen, making explorations in Cambodia more trouble than they were worth.
Since then, nobody has shown great interest in trying again, at least not in public. Likely prospects complain that Cambodia does not meet international regulatory standards and is bogged down by a clumsy and corrupt bureaucracy.
Yet the very year the oil firms left, Cambodia began to try to win them back, founding a Cambodian National Petroleum Authority (CNPA) to streamline industry regulations and petroleum laws.
Opposition politicians routinely denounce the CNPA as a license to steal, saying the ruling CPP is simply using the authority as a way to control a lucrative industry.
That’s an outrageous slander, says Te Duong Dara, director-general for the CNPA. “We have a strong institution that foreign investors should have faith in,” he said.
He said the CNPA’s goal is to simplify the contracting process for oil companies. Te Duong Dara reports directly to Prime Minister Hun Sen, meaning the bureaucratic delays and red tape experienced in other countries are potentially reduced in Cambodia.
He said before the authority was created, investors had to clear too many bureaucratic hurdles. “There were ten levels people [had to surmount] before reaching the prime minister. It made people tired of our system. So the current system is very convenient.”
The CNPA is eagerly seeking international investments in Cambodia’s potential oil industry, which remains unexploited both onshore and offshore.
It’s not clear how much petroleum might be out there. Of 12 wells drilled so far, three contained oil. Some experts say any petroleum that does exist is likely to be in small deposits that are expensive to tap.
Onshore, the areas believed most likely to contain oil lie north and west of the Tonle Sap.
According to the May 2001 issue of the industry magazine Petroleum Economist, the first oil wells in Cambodia date back to the Angkorian empire, when a 15-meter well was sunk under the Bayon in Angkor Thom and a much deeper well beneath Angkor Wat.
Others say Cambodia may have a claim to significant quantities of natural gas offshore in the Gulf of Siam.
But that’s a murky area too, as Cambodia and Thailand have argued for 30 years over who has rights to the area, though a memorandum of understanding signed by the two countries this month indicates progress towards solving the impasse.
Te Duong Dara believes more foreign oil firms with the necessary “technical and financial capacity” will invest in Cambodia because the country is now stable and world oil prices have risen sharply.
“We want foreign oil firms to come to explore and drill in Cambodia because we need these investments to serve the country,” he said.
The CNPA has drafted eight oil laws and regulations, which are to be submitted later this year to the Council of Ministers and then to parliament.
The regulatory package includes a petroleum management law, regulations governing a model oil production service, a petroleum tax code and other oil-related matters.
The package has been approved by experts in the authority and must still be examined at inter-ministerial meetings and by the Council of Jurists before going to the Council of Ministers.
Te Duong Dara said regulations such as the 70-page “Model Oil Production Service” spell out very specifically how an oil business should run.
“It is very important that we have such regulations for foreign investors to see how best we can serve them in a legal, attractive manner,” he said.
But since its creation, the authority has been harshly criticized by some industry officials and opposition politicians who allege that putting the CNPA under the Council of Ministers is like setting a fox to guard the hen house.
National Assembly lawmakers from the Sam Rainsy Party say creating the authority and placing it under Cabinet control was a corrupt act, and that the CNPA has done little to attract international investors.
They stepped up the criticism recently, calling the CNPA creation “illegal” and saying it should be scrapped, as it is too costly for the cash-scrapped government.
Critics also claim the move strips power from the Ministry of Industry, Mines and Energy to manage the potentially highly profitable oil sector, and hands it to top government leaders to exploit for personal gain.
“It’s slanderous [to say] we brought this oil sector under the Cabinet to personally benefit the circle of top leaders,” he said. “We control it to better manage and eliminate red tape in this sector.
“Every country in Asean, except Laos, has a separate institution to control and manage the oil sector” because it is so important, he said, citing Thailand’s PTT and Malaysia’s Petronas as examples.
Te Duong Dara said that some parliamentarians know better, but still pretend to attack the authority for political gains.
Regardless of opposition attacks, the CNPA is recognized in the region as the body to go to for oil deals. In April, the CNPA joined the Asean oil council, ASCOPE, at its 26th Council Meeting in Singapore.
Cambodia nominated Cabinet Minister Sok An, chairman of the CNPA, as the ASCOPE Council member for Cambodia. Te Duong Dara has been selected as the ASCOPE National Committee Chairman of Cambodia.
Some industry executives have applauded the CNPA’s increasing distance from the government, and cite its more active role in the Cambodia-Thai oil dispute as a good example of cutting through a potentially crippling bureaucracy.
Previously, the Ministry of Foreign Affairs had spoken up on the issue, saying it was a diplomatic dispute between the two countries.
Japan’s Marubeni company represents two of the five companies that have signed up to drill the area once the issue is settled. Last year, Marubeni spokesman Michiaki Takahashi complained that the foreign ministry would “take more than 100 years” to settle the dispute.