Total confirms $8m social fund [-More tea money?]

Friday, 30 April 2010
James O'Toole
The Phnom Penh Post

FRENCH energy company Total confirmed Thursday that it paid the government US$28 million, including $8 million for a “social development programme”, to secure rights to drill for oil offshore in an area claimed by both Thailand and Cambodia.

Penelope Semavoine, a Total spokeswoman in Paris, said Thursday the company had signed the agreement in October with the Cambodia National Petroleum Authority (CNPA) to explore the 2,430-square-kilometre offshore block designated Area III. The company, she added, paid a $20 million signature bonus to the CNPA in January and is planning an $8 million social development fund.

Prime Minister Hun Sen referred to the Total deal in a speech at the Government-Private Sector Forum in Phnom Penh on Tuesday. Rebutting media reports that mining giant BHP Billiton paid bribes to the Cambodian government, the premier said the firm had merely contributed to a social development fund. Total, he noted, “also paid this kind of money”.

Speculation has seized on Cambodia as the origin of an ongoing graft inquiry at BHP in part because of a $2.5 million payment to the government that the company said was for a social fund but that Minister of Water Resources Lim Kean Hor described in 2007 as “tea money”, or an unofficial fee.

Semavoine said Total’s $8 million social fund payment will be “administrated by committees that will include representatives from the CNPA and Total”.

“That will be a social development programme aimed at improving general health, education, culture, and welfare for the people of Cambodia,” she said. Exploration of Area III, she added, will not be undertaken until Cambodia and Thailand reach an agreement on their maritime boundaries.

A deal for the onshore Block 26, which covers an area of 22,050 square kilometres from Phnom Penh to the Vietnamese border, is still under discussion, Semavoine said.

Thai instability blamed for delays in oil talks

Monday, 25 May 2009
Written by Ros Dina
The Phnom Penh Post

Negotiations on overlapping areas in Gulf of Thailand stalled by political unrest, says CNPA, after Chevron's call for resolution.

THE Cambodian oil authority said at the end of last week that Thailand's recent political instability had delayed negotiations between the two countries over the vast disputed offshore area in the Gulf of Thailand that potentially holds marketable oil reserves.

Te Duong Dara, director general of the Cambodian National Petroleum Authority (CNPA), said that Thailand's recent turmoil and change of personnel in government meant that a clear policy on the issue had not been established in Bangkok, adding that Cambodia would have to wait until its neighbour's political situation improved before readdressing demarcation of the disputed 27,000-square-kilometre offshore area.

"Specific work teams are needed for negotiations, but they are not in place yet. For us, there are no changes, but Thailand has political instability. They do not have a work team leader or technology team leader yet, so we have to wait until the political turmoil subsides."

Thai embassy First Secretary Kamrob Palawatwichai declined to comment on Sunday.

An oil industry specialist working for a Thai company who declined to be identified said Sunday that delays in the process were partly due to political instability, meaning that policy and personnel on the issue had yet to be decided in Bangkok, but added there were additional factors.

He said that low oil prices meant that the incentives for new exploration were not currently there, while uncertainty of deposits in the disputed area was likely another factor - if the area was known to hold large deposits, undoubtedly the process of resolving the issue would speed up, he added.

"[oil companies] want both countries to find a solution as soon as possible."

The Bangkok Post reported last week that the US-based energy company Chevron - which operates Cambodian offshore concession Block A - had called upon Cambodia and Thailand to speed up negotiations on disputed offshore areas where, it said, it was "ready to take part in developing ... as soon as the resolution is made".

"They [oil companies] want both countries to find a solution as soon as possible so that they will benefit from a solution," Te Duong Dara said in response to Chevron's call.

Government Spokesman Khieu Kanharith reacted at the end of last week by saying that Chevron did not need to push the issue given that Cambodia has been working on a resolution to the overlapping-claims issue for some time.

Te Duong Dara said that the Kingdom remained in discussions with Chevron over an extension to the operating licence for Block A, which could extend for a further two months, he added, despite the last agreement having expired in April.

"We have our own strategies for negotiating, and we will see what the result is," he said, adding that it would take up to a further three years to market oil from the offshore block.

Both sides have refused to disclose details on the negotiations.

Chevron should consider reputational risk

Monday, 25 May 2009
Written by Gavin Hayman, Global Witness
Letter to The Phnom Penh Post

Dear Editor,

Your article "Chevron deal still unresolved as crisis impacts exploration" (May 20, 2009) cites the economic crisis as the reason for delays in renewing Chevron's oil exploration agreement with Cambodia. Chevron should consider other factors in negotiations with the government - not least of which is reputational risk.

Earlier this year, Global Witness exposed major governance failings in Cambodia's emerging oil sector. Our report, "Country for Sale", revealed that the institution in charge of Cambodia's oil industry - the Cambodian National Petroleum Authority (CNPA) - is a constitutionally dubious body under the direct control of Prime Minister Hun Sen and his deputy Sok An.

Centralisation and politicisation of power within the CNPA has created a dysfunctional organisation over which the Cambodian parliament has no oversight. A setup like this leaves the industry wide open to corruption and exploitation.

Companies such as Chevron have a role to play in improving the governance of the country's extractive industries to help reduce poverty. As a key member of the Extractive Industries Transparency Initiative, Chevron should lead by example. To start, it should disclose any payments it makes to the Cambodian government.

Given recent events in Ecuador, reputational risk should be at the core of Chevron's approach to Cambodia.

Gavin Hayman, Global Witness
London

Pay day politics

Where pro-Chea Sim Vice President of the CNPA, Ho Vichett, is given more political duties, such as the drafting of legislation, pro-Hun Sen Director General of the CNPA, Te Duong Tara (pictured), is in charge of the contracts and the more commercial side of the business

Excerpt from "Country for Sale"
Global Witness

The CNPA fails to pay its workers a living wage

Common to the vast majority of civil service jobs in Cambodia, the effectiveness of the [Cambodian National Petroleum Authority] CNPA is undermined by the low salary level for employees. Most CNPA employees do not earn a salary sufficient to cover their families’ costs of living. The typical salary for a CNPA employee is US$45 each month: only 20-25 per cent of what is needed to cover the costs of living.

For many trained staff within the CNPA, a combination of the politicisation of work responsibilities and these low level salaries mean that they hold second jobs. One observer claimed that some staff only show up in the office on pay day. The Bridge Group’s independent Training Needs Assessment again offers a more diplomatic explanation:

“On a typical day, some 30 employees come in the morning and only some 10-12 return after lunch… Many employed have received further training… However, they have not had the opportunity to apply the knowledge gained in their daily work, and it has not been developed but instead been continuously eroded. The training has therefore to a large extent been wasted, and this is the source of much frustration among the employees.”

The lack of adequate funding of salaries for CNPA employees appears out of step with the funding for staff development which, according to the CNPA’s model petroleum agreement, is due to the CNPA each year. This contract states that each oil signatory is required to pay US$150,000 each year for staff training and development. Given this, the CNPA should currently be the direct recipient of at least US$900,000 each year for staff training and development.

It is doubtful whether money paid by investing companies for staff training could be used for salary payments. However, when compared, the disparity between staff salaries and income to the CNPA does raise questions as to the wisdom or rationale of keeping staff wages so low, or what any payments are being used for.

Global Witness wrote to the Director General of the CNPA, Te Duong Tara, to ask what the staff training and development fund is used for. At the time of publication, Global Witness had not received a response.

Cambodia's first oil to be delayed, official says

Eric Watkins
Oil Diplomacy Editor
Oil & Gas Journal

LOS ANGELES, Nov. 4 -- Cambodia is unlikely to produce its first hydrocarbons until 2010, according to a senior government official.

Ho Vichit, vice-chairman of the Cambodian National Petroleum Authority, said his country has been anxious to tap its hydrocarbon resources, but the Chevron Corp.-operated Block A is unlikely to be on stream before that date at the earliest.

"Chevron is planning to do more exploration and appraisal. By the end of the year, they will submit a development plan," Ho told reporters on the sidelines of an energy conference in Singapore.

"It's premature to speculate how much oil or natural gas can be pumped from offshore Block A," Ho said at the Asia Oil and Gas Investment Congress.

"It must be recognized that hydrocarbons shows alone do not make…an oil or gas field, let alone an oil or gas field that might be viable for commercial development," said Ho.

Ho said there are some "technical challenges" to overcome and that "based on exploration results, it's most likely that a mix of low-sulfur waxy crude and some gas will be produced."

Hopes about the field's prospects were raised last year when the International Monetary Fund forecast recoverable reserves from Block A at 500 million bbl, with the first of three fields expected to start production in 2011.

The IMF predicted a $15 billion windfall for the Cambodian government from royalties and taxes over the life of the fields.

In March of this year, Chevron downplayed speculation about start-up dates for the field.

"As of early 2008, Chevron and the Block A participants are still evaluating development options for Block A, and therefore it would be too early to speculate on costs or schedules for the project," said Chevron spokesperson Nicole Hodgson.

In 2002 the Cambodian government awarded Chevron Overseas Petroleum (Cambodia) Ltd. a concession for the exploration and production of oil and gas offshore on Block A.

In 2005, COPL discovered oil in four exploration wells on Block A. Oil pay logged in the wells was 41-139 ft. Analysis of crude samples indicated the oil to be 44°.

A 5-well exploration and appraisal program was completed in 2006 and was followed by the exploration and appraisal of four more wells in 2007.

Chevron last year issued a downbeat assessment of the block, after its second drilling campaign revealed challenges, with hydrocarbons being dispersed rather than in one core field.

The company said it planned a third drilling campaign for late 2008-09.

Chevron operates Block A and holds a 55% interest, while Mitsui Oil Exploration holds 30%, and South Korea's GS Caltex has 15%.

Cambodia's first oil unlikely before 2010

SINGAPORE, Nov 4 (Reuters) - U.S. major Chevron Corp has yet to submit a plan for what was slated to be Cambodia's first oil development, a senior Cambodian official said on Tuesday, which would mean first oil is unlikely until the next decade.

The impoverished Indochinese country has been keen to tap its hydrocarbon resources like its Thai and Vietnamese neighbours but Chevron-operated Block A, once touted as Cambodia's route to riches, is unlikely to be onstream before 2010 at the earliest.

"Chevron is planning to do more exploration and appraisal. By the end of the year, they will submit a development plan," Ho Vichit, vice-chairman of state-owned Cambodian National Petroleum Authority (CNPA) told reporters on the sidelines of an energy conference in Singapore.

The time lag between a development plan and first oil is usually at least a year and often take several years.

But Ho said the field would be developed, rejecting the suggestion that development could be shelved.

Chevron issued last year a downbeat assessment of the offshore block, after a second drilling campaign showed the block presented challenges, with hydrocarbons being dispersed rather than in one core field.

The company also said at the time it planned a third drilling campaign for late 2008-2009.

Chevron operates the block with a 55 percent interest, while Mitsui Oil Exploration, a unit of Mitsui & Co, holds a 30 percent stake and South Korea's GS Caltex a 15 percent stake.

Cambodia has since toned down its oil ambitions and initial estimates of 400-700 million barrels are no longer discussed.

"We are still at the early stages of exploration," Ho said, when discussing plans to establish a national oil company.

For the time being, CNPA, which is regulatory body, acts as the government's representative in contracts.

Ho said it was too premature to discuss finds on other blocks as companies had just completed drilling.

Thai PTT Exploration and Production PTTE.BK said in a statement in July that exploration well Vimean Morodok MahaNorkor-1 on block B resulted in non-recoverable oil shows. The company said it would continue technical work to evaluate the block, which it operates.

Cambodia is keen to attract investors to develop both the upstream and downstream sectors, as it has no refinery and imports about 1 million tonnes of refined products a year.

The lack of geological data has limited interest in onshore blocks, with several yet to find takers.

But offshore, the continued border dispute with Thailand is preventing exploration in some areas.

Ho declined to comment on when the dispute could be resolved and whether the latest flare-up over the 900-year-old Preah Vihear temple with Thailand was making things worse.

"This depends on politics," he said.

(Reporting by Maryelle Demongeot; Editing by Ramthan Hussain)

In spite of Te Duong Dara's denial, Hun Sen's regime to sign mainland oil and gas deal after the election with France and China

France, China to sign oil and gas deal with Cambodia

Phnom Penh, Jun 13, 2008 (Asia Pulse Data Source via COMTEX) -- France's oil and gas company TOTAL and China National Offshore Oil Corporation CNOOC are expected to sign a deal with Cambodia to explore oil and gas on the mainland of Cambodia.

The signing ceremony will take place this year, following the conclusion of Cambodia's parliamentary election scheduled on July 27.

Currently, other oil and gas companies in the world such as Moeco, Jogmec, GS Gallex, Pan Orient and Inpex are working with Cambodian National Petroleum Authority (CNPA) to reach agreements on oil and gas exploration in the country.

Oil Contracts Remain a 'Mystery': Lawmaker

By Chun Sakada, VOA Khmer
Original report of Phnom Penh
12 June 2008

Cambodian National Petroleum Authority denied to comment on media reports Thursday that two companies were close to signing drilling contracts for onshore oil exploration.

France's Total and the government Chinese national Offshore Oil Corp near deals for onshore exploration, the Cambodia Daily reported Thursday.

Petroleum authority chief Te Doung Dara would not confirm the report.

Sok Sina, an independent economic analyst, said the government should show the contracts to the public for consideration before signing them.

Eng Chhay Ieng, secretary-general of the Sam Rainsy Party, called the agreement a "mystery" related to corruption.

"Because we are the MPs, want to know the agreement," he said, "and the government must show us what they will do and what the meaning of the agreement is."

CNPA's Te Duong Dara: Cambodian oil production to start in 2011 [-Information on companies involved in the exploration still in the dark]

Cambodian oil production to start in 2011: energy official

PHNOM PENH (AFP) — Cambodia expects to begin oil production in 2011, a senior energy official said Wednesday amid warnings that new-found petroleum reserves did not guarantee instant prosperity for the impoverished country.

"If there is no delay, we are planning the first oil production for around 2011," said Te Duong Dara, director-general of the Cambodian National Petroleum Authority (CNPA), speaking at a conference of global industry experts and energy company officials in Phnom Penh.

He declined to say how many companies were currently exploring for oil in six vast blocks off Cambodia's shores.

Following the discovery of oil in 2005 by the US energy giant Chevron, Cambodia was quickly feted as the region's next potential petro-state, sitting on an estimated hundreds of millions of barrels of crude, and three times as much natural gas in six blocks located off of the coast.

Chevron, the most active of several firms exploring the fields, remains mum, saying only that its test wells have found that the oil and gas is "dispersed rather than located in one core field," according an earlier statement.

Government optimism has also been blunted, with Prime Minister Hun Sen warning late last year that it was "highly premature" to estimate how much oil Cambodia might hold in undersea reserves after other officials projected that the country could begin production in 2009.

Concerns have also been raised over how Cambodia -- one of the world's most corrupt countries -- would use its new-found oil and gas wealth.

"Many assume the discovery of oil and gas reserves automatically translates into greater prosperity. Unfortunately, this is not the case," Jo Scheuer, Cambodian country director of the UN Development Agency, said Wednesday.

"Economic growth in resource-rich developing countries has been on average two to three times lower than resource-poor countries," he added.

"Cambodia's non-renewable resources are important assets that must be used wisely."

While GDP growth estimates remain some of the highest in the region, averaging 11 percent over the past three years, nearly a third of Cambodia's 14 million people survive on only 50 US cents a day or less.

Despite their uncertainty over how much oil can be pumped from Cambodia's reserves, government officials are adamant that petroleum profits would not be squandered, saying the sector is essential to the country's continued growth.

"The discovery of oil and gas ... is a vital step in contributing to the country's sustained economic development," said Deputy Prime Minister Sok An, who also chairs the CNPA.