Kingdom seeks buyers for crude amid discouraging production

Content image - Phnom Penh Post
The Kingdom extracted its first drop of crude oil on December 28 from the A-01D well – part of the five-well mini-platform featured in KrisEnergy's “Mini-Phase 1A” development. MINISTRY OF MINES AND ENERGY

The government and Singaporean oil exploration firm KrisEnergy Ltd are actively working together to find markets for the crude oil produced offshore Cambodia and to plan for further steps in resource development for Block A, according to a senior government official.

The statement came after the media and civil society raised concerns about the Kingdom's ‘failures' in the oil and gas sector due to the lower-than-planned output of the five wells in the Apsara oilfield located in Block A that lies over the Khmer Basin in the Gulf of Cambodia.

 

The Kingdom extracted its first drop of crude oil on December 28 from the A-01D well – part of the five-well mini-platform featured in KrisEnergy's “Mini-Phase 1A” development.

But a KrisEnergy statement on April 28 cautioned that the reduced production would have a substantial adverse impact on revenue generated from the Mini Phase 1A development, despite a recovery in benchmark oil prices since the lows of 2020 when the Covid-19 pandemic began to emerge.

Ministry of Mines and Energy secretary of state Meng Saktheara said in a May 12 Facebook post that the production capacity of each well was not significantly different from US energy giant Chevron Corp's previous estimates.

He said the ministry is actively working with a team of KrisEnergy technical experts to secure a market for Cambodian oil and plan the next steps in the development of resources in Block A.

"Whatever happens to KrisEnergy – be it a deviation from, or according to expectations – it should not be deemed a failure or a blessing for any group of Cambodians.

“On the other hand, whether the expectations were right or wrong, Cambodia has truly marked a new chapter in history by becoming an oil-producing country and building its national capacity in such an industry,” he said.

 

And addressing critics of the Kingdom's oil and gas sector, he added: “And a number of foreigners – they should not be jealous of Cambodia either, because virtually all countries in the region have been oil producers for a long time."

In the midst of economic disruption due to the pandemic, Saktheara said that, as a Cambodian, the announcement of the start of the Kingdom's oil production in end-2020 was a source of great national pride.

"I have seen a number of civil society groups and NGOs that have been spreading speculation about the large estimated figures. US giant Chevron spent more than 10 years exploring for oil and still could not start production.

“It is clear that the results of Chevron's assessment indicate that Cambodia's initial oil resources are not much, and that Chevron's departure is merely a confirmation to civil society organisations and NGOs of wrongdoing of their inflated figures," he said.

Prior to its exit, Chevron planned to extract 7,500 barrels of crude oil per day from 22 wells in an initial development phase, he said, adding that more wells are needed because oil production per well is “very low”.

After Chevron's departure, Singaporean successor KrisEnergy had initially planned for 20 wells, he said.

But after its parent company ran into financial difficulties and with the onset of the Covid-19 crisis, KrisEnergy opted to commission just five wells to provide performance data to understand the reservoir drive mechanism as a first development phase, and extract the first drop of oil in a timely manner in accordance with the plan set out in the petroleum agreement, he added.

"Reducing the number of wells from 22 to five was like a lottery for the company, and it still expected to be able to produce about 7,500 barrels per day, as Chevron originally planned to do with 22 wells.

"The government and concerned ministries are well aware of this, and so far all government announcements and ministry experts have made it clear that a ‘first drop of oil' is not much, and is not expected to provide the revenue to the national budget that would change the size of the Cambodian economy now, or in the near-term future.

"But this is just the beginning of history in this field for this nation, after a lot of effort and countless challenges," Saktheara said.