Mixed Results for Oil Firm’s Search Off Coast

The first well drilled by a major Chinese company looking for oil and gas in Cambodian waters has been completed, though hydrocarbons in the firm’s offshore block are proving elusive, an official at the Cambodian National Petroleum Authority (CNPA) said.

CNPA Deputy General Director Men Den said in an interview on Tuesday that the state-owned China National Offshore Oil Corporation (CNOOC) had recently finished drilling at its first exploratory site.

“The structure is good, but the oil and gas goes somewhere—it migrates,” Mr. Den said, explaining that while actual oil and gas had not yet been discovered, the type of rock found suggested there would be oil elsewhere in the licensed area.

He added that CNOOC had plans to conduct more drilling and exploratory work in the future.

CNOOC—China’s largest offshore oil and gas producer—announced a $20 million plan to drill its first well off the Cambodian coast in December 2011. CNOOC was originally awarded the 7,000-square-km Block F, which sits off the coast of Preah Sihanouk and Koh Kong provinces, in 2007.

Yang Tian Yue, spokesman for the Chinese Embassy in Phnom Penh, confirmed that drilling on the first well had been completed, but said he did not know the results.

“This is maybe the company’s confidential information,” he said.

Cambodia has granted six licenses to a host of companies looking for oil and gas in the Gulf of Thailand, but none of those firms have moved to the extraction phase. The most advanced, Block A, is held by a consortium led by Chevron Corp. The U.S. company has drilled at least 18 wells and has announced that it wishes to extract oil. But before a final deal can be signed, the Ministry of Finance must agree on fiscal terms with Chevron, Mr. Den said.

Experts say that Block A contains oil, but only a small proportion of the area’s hydrocarbons is actually recoverable.

Hong Kong-based Mirach Energy, which holds an exploration license in Block D, is waiting for an environmental impact assessment before it can drill exploratory wells. And Thailand’s PTT has begun drilling wells in Block B, but has not yet declared any results.

The seismic investigations carried out by firms on the two other blocks, C and D, have discovered “no prospect,” Mr. Den said.

For years, vying for exploration licenses in Cambodia has been surrounded by speculation over the boon the extractive industries could give to government revenues, and concern that this largesse would be lost to corruption.

But oil and gas has proved hard to find and, so far, has been limited in quantity.

In recent years, fears over a decline in the global availability of hydrocarbons have also been pushed aside by new finds and new technology, potentially making difficult extraction in Cambodia an even less attractive option.

According to the International Energy Agency’s World Outlook Report published last month, new oil drilling and the newly available “unconventional gas”—accessed by a controversial technique called fracking—means global energy reserves are in good health.

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