PetroVietnam Suspends Cambodian Kompong Thom Operation

By Khmer Times/May Kunmakara   April 6, 2016 | 10:27 am GMT+7
PetroVietnam Suspends Cambodian Kompong Thom Operation
A worker fills a mototcycle at a gas station in Phnom Penh. Low oil prices are hitting production. KT/ Chor Sokunthea

Low oil prices and internal management changes have forced PetroVietnam Exploration Production Corp. (PVEP), an upstream unit of the state-owned PetroVietnam, to suspend its operations in Kompong Thom, a senior official with Cambodia's Ministry of Mines and Energy (MME) said yesterday.

Meng Saktheara, Secretary of State of the MME, told Cambodian Khmer Times that the ministry had agreed to the request from the company to shut down its operations on block XV. It had asked for a delay in January when it was at the drilling stage.

“The company asked the ministry for a postponement in drilling within this year due to the current sharp decline of global oil prices. And secondly, they have an internal issue with a change of management,” said Mr. Saktheara.

“We do understand their situation that’s why the ministry agreed to the suspension.”

Yesterday’s announcement occurred as the price of crude fell to $28 a barrel, its lowest in 12 years. Prices are falling on dwindling hopes that key producers will reach an agreement to freeze output when they meet this month to discuss a global supply glut.

After breaking above $40 in March on expectations for the Russia-Saudi Arabia-led talks, the commodity has tumbled in recent weeks

The April 17 Doha meeting aims to agree to cap output at January 2016 levels, but analysts say only a production cut can lead to a sustained recovery in prices.

PVEP reached an agreement with the government to explore and exploit oil and gas at Block XV in the Tonle Sap Lake area in November 2009.

The agreement to exploit oil expires in 30 years and for gas in 35 years and Block XV covers 6,900 square kilometers. It is PVEP’s 55th oil and gas project and the 17th under its direct control.

Recently, Singapore-based oil and gas firm KrisEnergy delayed its agreement to exploit Block A and the government last year cancelled two concessions for offshore fields Block B and Block F held by two foreign companies because they failed to comply with the terms of their contracts. All three blocks are in the Gulf of Thailand, at depths of up to 80 meters.

KrisEnergy’s partners in Block A are Japan’s MOECO with 28.5 percent, Korean-owned GS Energy with 14.25 percent and Cambodia National Petroleum Authority with 5 percent. The contract area covers 4,709 square kilometers.

Blocks B and F are being exploited by Malaysia’s Resourceful Petroleum Limited.

According to Mr. Saktheara, the ministry will meet PetroVietnam officials soon to push the company to expedite the project as time is running short for them.

“We will have the coordinating committee meeting between the company and the ministry to work on some technical issues after the Khmer New Year because we want to push them to speed up their work as they have limited time for the work,” he said.

“We allowed them to suspend drilling a well which they need to know about potential of the reserves, but we won’t allow them to suspend oil exploration because they will be running out of time if they suspend drilling for too long.

“So they have a very short time to speed up their work to meet their deadline. We think that they will resume their work later this year or early next year because they are at the stage of drilling a well which normally has to happen in the dry season.”

Kim Natacha, executive director of Cambodians for Resource Revenue Transparency told Khmer Times this month that sharp declines in global oil prices will make investors in the gas and oil industry hesitate about investing in new projects.

“The current low prices of crude oil have driven most exploration and oil companies worldwide to review their operations,” Ms. Natacha said.

“However, until we can hear from the companies or the government the reasons for termination, we cannot presume that the low crude oil prices was the main reason or one of the factors.”

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