Oil exploration in Cambodia

In Southeast Asia, Cambodia is one of the countries rich in natural resources—gemstones, gas, oil, phosphates, manganese, iron ore and timber.¹ Since the early 2000s, many companies like Thailand’s PTT, Petro Vietnam and China National Offshore Oil Corp (CNOOC) have searched for possible oil reserves inside Cambodia’s territory.² It was Chevron, a large U.S. oil company, which confirmed the presence of oil offshore in Block A, located close to Preah Sihanouk Province.³ However, the quest for oil remained stalled until late 2020, when the first drop of oil crude was extracted from the seabed in Cambodian waters.⁴ This blog will unearth the brief background of oil exploration attempts, potential economic benefits, and assess environmental impacts followed by legal frameworks.

The interactive map of oil and gas blocks in Cambodia (2007-2020)

Background of oil exploration in Cambodia

In 2004, Chevron announced it had found oil in the offshore reserve Block A, in the Gulf of Thailand.⁵ However, the production of oil did not materialize due to the government and Chevron failing to reach an agreement on revenue sharing. This finally resulted in the U.S. oil giant abandoning the project and selling its interest.⁶

In 2014, the Singaporean-based company KrisEnergy bought the right of oil exploration from Chevron and became the operator in Cambodia’s oil Block A. The potential for offshore oil extraction became more visible when the government and KrisEnergy reached an agreement on production details and finances, allowing KrisEnergy to prepare for extracting oil from the 3,083 sq.km. block. KrisEnergy launched Phase 1A of the Apsara development, where the company expected to be able to extract around 30,000 barrels of oil and gas.⁷

Photos credit: KrisEnergy.

In 2019, Canadian-based mineral exploration company Angkor Resources also gained approval from the Royal Government of Cambodia (RGC) for oil and gas exploration. In the agreement, Angkor Resources gains the right for oil and gas exploration in Block VIII, an onshore location in Preah Sihanouk province covering around 7,300 sq. km.⁸⁹In 2020, Chinese-owned Cambodian Resources Energy Development Co Ltd gained a three-year exploration license for the 5,500 sq. km Block D in the Gulf of Thailand.¹⁰

Economic benefits

With production from oil reserves, Cambodia is expected to increase its revenues by hundreds of millions of dollars—depending on production volumes, oil price and field costs.¹¹ H.E. Aun Pornmoniroth, Deputy Prime Minister and Minister of Economy and Finance said that the Block A oil reserve could generate an income for the Cambodia Government, over the project’s lifespan, of around US$ 500 million.¹²

After 10 years of work, KrisEnergy extracted the first drop of crude oil from the offshore Block A in the Khmer Basin’s Apsara oilfield in late 2020, making Cambodia the eighth oil producer in the ASEAN region. This result may open the gates for other investors and global companies in the oil and gas sector. Mr. Cheap Sour, Director-General of the Ministry of Mines and Energy’s General Department of Petroleum, said the oil resource production could reach up to around 7,500 barrels a day from five wells.¹³ Successful oil exploration will allow Cambodia to export oil to other countries, sustaining its financial footing and reducing oil importation needs.¹⁴  Unfortunately, Cambodia’s involvement in oil production is likely to be only the production of crude oil, as the Ministry of Mines and Energy has pointed out, due to Cambodia’s lack of infrastructure to process the oil.¹⁵

Environmental impact

Exploration for resources has possible adverse effects on the environment, whether on land, coastal areas, or the marine ecosystem. Such impacts may occur from the exploration phase through to decommissioning of the operation. Contaminants may vary between offshore and onshore projects due to the different kinds of environments. Ecological impacts include air emissions, noise generation, wastewater discharges, solid and liquid wastes, spills, and so on. Long-term impacts may happen to the marine ecosystem if there is no adequate solution around decommissioning.

Wastes and materials containing toxic and hazardous substances in the offshore installation and abandoned structures may endanger fishermen and ships. Wildlife of many kinds may be destroyed by oil spills.¹⁶ In addition, oil spills can be disastrous for the long-term future of marine life since pollutants can affect the reproduction of marine animals and can destroy the food supply of marine life.¹⁷ Any occurrence of spills of toxic or hazardous substances including oil will have impacts on society and the economy.¹⁸

Environmental Impact Assessment: Cambodia Block A Development

Legal framework

To ensure the efficiency and the safety of the extraction of non-renewable resources, the RGC has adopted laws to regulate company activities. Among others, there are the 1991 Petroleum Regulations and amendments and the 2001 Law on Mineral Resource Management and Exploitation. Both aim to regulate the management and exploitation of mineral resources, the operation of mines and all related activities.¹⁹ The Law on the Management of Petroleum and Petroleum Products was also adopted to further manage the petroleum field to ensure sustainability and effectiveness for the socio-economic development of the country.²⁰

In 2018, a draft of new oil and gas legislation was circulated for consultation with NGOs, the private sector and other industry organizations. There have been claims from the media that the government is considering the creation of a state-owned oil company that will participate in exploration and joint-venture opportunities for projects in the oil and gas sector.²¹ Any new oil and gas law will control the functions of such a project.²²

Blog is written by: Mr. Chouth​ Chansambath, ODC Content and Research Intern.