Cambodia's oil must not be the slippery slope to corruption and catastrophe

There is concern that the discovery of oil will cause damage to areas such as this beach near Sihanoukville in Kampong Som province. Photograph: Luca Picciau/Alamy

Tuesday 21 June 2011
By Julian Boys
guardian.co.uk

Cambodia must get a fair deal for its natural resources, and the revenues should go towards improving the lives of its people

Emerging from genocide and decades of civil war, Cambodia's discovery of oil raised hopes of faster development for the country – but also fears that the "resource curse" might strike again.

Oil production will come on line next year and local campaigners are racing to prevent Cambodia going the same way as countries such as Nigeria, where the industry has fuelled corruption and environmental catastrophe.

Things got off to a bad start, according to Global Witness. In 2009 it reported that oil exploration licences had been granted largely in secret, while the mining sites it investigated were all owned by the country's political and military elite. Since then, the public has not been consulted about the drafting of new laws governing extraction of natural resources.

Perhaps the lack of democratic values isn't surprising in a country where the prime minister has been in power for almost three decades. But despite the difficulties, grassroots organisations are pushing for Cambodia's oil to be managed in ways that allow citizens to see what the government does with the resulting revenues – and to hold it and oil companies accountable for their actions.

Experts Gather to Debate Mineral Extraction

By Kong Sothanarith, VOA Khmer
Original report from Phnom Penh
31 March 2010

Mineral extraction and development experts opened three days of meetings with government officials Tuesday in an effort to ease Cambodia’s move into a lucrative sector expected to bear fruit in the near future.

“Currently, knowledge about oil, gas and mining in this country is limited,” Douglas Broderick, the UN’s chief Cambodia coordinator, said in opening remarks Tuesday, before extraction experts from across Asia. “Learning from the lessons of others will help Cambodia in the extraction industry in a way that will bring benefits to all.”

Cambodia has the potential to yield silver, gold, oil and other precious minerals in at least a dozen provinces. Exploration is already underway, but there are wide concerns the industry’s abundant profits will not help all Cambodians and could find their way into the pockets of the rich, powerful or corrupt.

“The sharing of information is so critical,” Brian Lund, regional director for Oxfam America, which sponsored the conference, told reporters Tuesday, calling this week’s meetings “a starting point.”

Members of the government, private sector and civil society were all realizing the importance of minerals in the development of Southeast Asia, he said.

“Cambodia is a part of that,” he added, warning that possible downsides of extraction must be countered with clever management.

First up for Cambodia is oil and gas, which some estimates predict will start to flow by 2013, with an estimated revenue stream of $1.7 billion by 2021. Next would be mineral extraction, which could start bringing in money by 2015.

Experts warn that without transparent means to distribute the wealth of these industries, profits will not filter down to everyday Cambodians. They point to Cambodia’s disastrous forestry policies of the 1990s, when most of the country’s timber resources were cut down and sold off—legally and illegally—in trade that benefitted an elite few.

Tuesday’s meetings were a start at mitigating those concerns, participants said.

“Debate is a positive process that will ensure that Cambodia adopts good governance and, in the long term, develops a strong mining sector,” Richard Thompson, an international investment expert from the UK, said.

Meanwhile, Hang Chuon Naron, secretary general of the Ministry of Economy and Finance, said Cambodia now must “balance taxation and build up the capacity of government officials.”

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."

Cambodia faces challenge of oil [-Looming oil curse still present as long as Hun Sen is in power]

June 13, 2008
James Norman, Cambodia
The Age (Australia)

HERE in Siem Reap, in northern Cambodia, there is a sense of optimism that after decades of brutality, corruption and endemic poverty, better times are finally on the horizon.

Cambodia has struck oil off its southern coast, near the town of Sihanoukville, but no one knows exactly how much is there.

According to Marvin Yeo, who left the Asian Development Bank to establish a Cambodian venture-capital company, it is the only country that has untapped oil and gas reserves and land available for agriculture.

Yet there is good reason for concern that Cambodia's energy reserves might prove to be a poison chalice. In countries such as Nigeria and Chad, the people have been left worse off after big resource booms dragged them further into poverty and corruption. Today, 70% of Nigerians live on less than $1 a day, despite the country earning $450 billion from oil over the past 35 years.

The discovery of oil in Cambodia has attracted significant international investment, and exploration rights are divided between American (Chevron), Chinese, Indonesian, Hong Kong and Singaporean investors. As an indicator of regional enthusiasm, China reportedly gave a $600 million donation to Cambodia, just as Chinese companies were fighting for a larger share of the exploration rights.

During an international oil and gas conference in Phnom Penh in March, Cambodia was told by regional government and energy sector representatives to eradicate corruption or risk losing out on sustained investment. It was also urged to sign the Extractive Industries Transparency Initiative that requires governments and companies to disclose their financial records relating to oil, gas or mining deals.

Cambodia remains deeply traumatised by the "killing fields" of the Khmer Rouge, when 1.7 million people died between 1975 and 1979. In a country where 60% of the land is forested, 82% of Cambodians still live without electricity or proper irrigation, and 35% live on less than 50¢ a day.

Moreover, a recent tourism boom — evident in Siem Reap, with its opulent French cafes and bakeries — is having a negative impact on Cambodia's ethnic minorities. There has been a rush of foreign investment in real estate, often cutting into traditional tribal land, with no tangible benefit to the people living there.

Prime Minister Hun Sen and his ruling Cambodian People's Party, buoyed by the tourism boom, last year smoothed the way for investors to form 100% foreign-owned companies that can buy real estate outright.

"Neither the central government nor local officials consider the impacts on minority groups when awarding land concessions to local companies," said Pen Bunna, the Ratanakkiri co-ordinator for the Cambodian rights group Adhoc. Attempted protests by ethnic minorities over the past month have been effectively made illegal by regional authorities.

Lee Tan, the Asia-Pacific region co-ordinator for the Australian Conservation Foundation, said it did not take "rocket science" to work out what was ahead for Cambodia if its oil resources were exploited when corruption remained such a problem. "The governance track record of Cambodia is a problem," she said. "As long as there is no political will or effective governance, oil revenue can be abused.

"Unfortunately, the hunger for oil will see that such resource is exploited — often with support from development banks like the World Bank (which facilitated logging in Cambodia, Papua New Guinea and other forested nations that fuels corruption) and the Asian Development Bank or even AusAID."

The question for Cambodians is closer to home. Prime Minister Hun Sen has said explicitly that "we will try our best to make sure that the oil income is a blessing, not a curse. These revenues will be directed to productive investment and poverty reduction."

But many observers remain wary. Will the revenue be used to improve the appalling road and transport infrastructure, to build clinics and schools and irrigation channels, to raise the standard of living and to provide affordable power to its rural communities?

Or will it be sucked up by a powerful elite, again condemning the 14 million people in this damaged country to continue to suffer?

Sadly, history would indicate the latter to be the more likely outcome.

James Norman, a former Australian Conservation Foundation communications adviser, is writing as an independent journalist.

Petroleum Authority Talks About the Price of Oil

29th March 2008
By Sok Serey
Radio Free Asia
Translated from Khmer by Khmerization
On the web at http://khmerization.blogspot.com

An official from the Petroleum Authority of Cambodia on Friday said that even if Cambodia can extract natural oil and gases from the Cambodian seabeds in 2011, the high prices of petrol in Cambodia will not drop lower than the prices of petrol in the world markets.

Mr Te Duong Dara, Secretary General of the Petroleum Authority of Cambodia, in a press conference in Phnom Penh on the management of oil and gas revenues for the alleviation of poverty in Cambodia, said that Cambodia cannot isolate itself from the rest of the world, so the local prices of oil and oil exports will have to depend on world market prices.

He stressed that the prices of Cambodian oil cannot be set differently from other countries of the world. Otherwise, all other countries will flock to buy oil from Cambodia and the Cambodian oil reserves will dry out very soon.

In relation to the above issue Mr Sok Hach, an economist based in Cambodia, declined to make any comments regarding the issue.

But Mr Son Chhay, a parliamentarian from the opposition Sam Rainsy Party, said there were so much secrecy regarding the oil issues. He said: “We have observed that there were so many hidden secrets regarding the oil explorations because the agreements made between the government and the oil exploration companies have never been released to the public. What we are very concerned about is the embezzlement of oil revenues by the persons who control those oil revenues.”

Mr Te Duong Dara’s comments were made at a time when there are anticipations that Cambodia can extract oil and gases for the first time from Block A in the next 3 years- that is in 2011.

He did not mention how much oil and gases can be extracted and how much revenues can be generated. But he noted that Cambodia’s partners in the oil exploration were not only the US oil company Chevron but they include the World Bank, the Asian Development Bank and some donor countries as well.

Based on the research conducted by the United Nations, the World Bank and other institutions in 2007, the oil reserves under the Cambodian seabeds were estimated to be about 2 billion barrels and natural gases at 283 million litres, which will generate revenues to the tune of 6 billion US dollars in the next two decades, based on the world market prices.

Other than Block A oil wells that Cambodia plans to extract for the first time in 2011, Cambodia has contracted with Singaporean and Malaysian companies to extract oil from Block B, with Hong Kong and Macau companies to extract oil from Block C, with Chinese companies in Block D and with Indonesian and Kuwaiti companies, Energy, in Block E.