Nearly a month after the Council of Ministers announced that the French petroleum giant Total would be allotted more than 24,000 square km of Cambodian land and sea for oil and gas exploration, the concession deals that were on the verge of being signed are now on a knife’s edge.
On July 19 the government announced that it had awarded Total exploration rights in the 2,430-square-km Area 3 within the 27,000-square-km so-called “overlapping claims area” in the Gulf of Thailand. The overlapping claims area represents portions of the gulf claimed by both Cambodia and Thailand. Total was also granted rights to explore 22,000 square km of land around the Mekong River bordering Vietnam.
But according to Total, the government has pulled back from what appeared to be a done deal and is now asking for numerous changes to the agreement.
“We thought that from the moment the agreement was announced that the finalizing of it was only going to be a matter of changing the wording,” said Jean-Pierre Labbe, Total’s general manager for exploration and production in Cambodia in an interview on Thursday. “At the end of three years of the government committing itself to the French government and Total, it is out of the question that we re-open conversations,” he said.
According to Mr Labbe, Total learned about the government’s new requests at a Wednesday meeting between company officials and the Cambodian National Petroleum Authority at Cabinet Minister Sok An’s private residence in Phnom Penh.
A provisional agreement for the exploration rights was reached on July 15 when Prime Minister Hun Sen was in Paris meeting French President Nicolas Sarkozy. But in the days following Mr Hun Sen’s visit, Total heard nothing with regards to signing the contracts.
“Certain elements he was not happy with,” Mr Labbe said referring to Mr Sok An. “At the present moment we are victim of an attempt to postpone, an attempt to obstruct,” he said.
The principal problem outlined by Mr Sok An during Wednesday’s meeting, Mr Labbe said, concerned fiscal agreements with regard to how much of the revenue derived from the concessions would go to the government and how much would go to Total.
“We didn’t think that the list of objections would be so long and so heavy,” said Mr Labbe, admitting that he was surprised by the government’s decision to amend the initial approval.
“To take a concession in this zone is to take a risk. When we have taken risks and discussed for three years, it is natural for us not to want to start negotiations again,” he said.
Re-opening the contract would completely “destabilize the economic and technical balance of the contract,” he added.
Council of Ministers spokesman Phay Siphan said Thursday that he was unaware of the details concerning the negotiations with Total and declined to comment until he had seen the company’s comments in the press.
“I will meet the [Petroleum] Authority tomorrow. Now I don’t know,” he added.
Mr Sok An said he was too busy to comment when contacted by telephone on Thursday.
Ministry of Foreign Affairs spokesman Koy Kuong said he hadn’t heard anything about the state of the negotiations and referred questions to Mr Siphan and Var Kimhong, head of the government’s border committee. Mr Kimhong declined to comment because he was not personally aware of the issue.
Geologists widely agree that the overlapping claims area shows ample promise as it contains a continuation of structures in adjacent uncontested Thai waters that already produce large amounts of oil and gas.
Disputes over the area go back to over a century ago, when Siam and the colonial French government ruling Cambodia, Laos and Vietnam both claimed ownership.
Efforts made some headway when in 2001 the Thai and Cambodian governments signed a memorandum of understanding agreeing that a joint development regime could be established over the lower two-thirds of the contested area. Negotiations have been taking place ever since.
The government’s new demands on Total come just over a week after the English-language Thai newspaper The Nation reported that Cambodia’s Foreign Minister Hor Namhong had informed Thai Prime Minister Abhisit Vejjajiva that no work will take place in the disputed offshore Block 3 until the two countries resolve their disputes along the entire common border.
One week prior to Mr Namhong’s visit to Thailand, The Nation reported that the Thai military was drawing up a military contingency plan for the overlapping claims area in response to Cambodia’s announcement that they would permit Total to carry out exploration operations in Area 3.
On Thursday, Mr Labbe cautioned that the government going back on its word could damage its credibility.
“This is what we must change, the image people have of Cambodia. Total was very happy after the Prime Minister’s visit to Paris. But when the agreement was made we expect that it is carried through. If it is not we fall back on the bad habits from Cambodia’s past. This is not good,” he said.
Mr Labbe said that he has sent a letter to the Prime Minister proposing a meeting scheduled for Aug 24 to discuss the issue.
But for the moment, “the situation is one of disagreement,” he said. “At the end of three years, after the dedication, we can not erase everything.”