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Crude Prices To Stanch Oil Flow: Experts


While Cambodia waits for the oil to flow from its offshore blocks, potentially yielding millions of barrels and billions of dollars, industry experts have lowered their expectations.

“It is a very risky business. Oil is sticky, and it likes to stay in the ground,” said Michael McWalter, an oil and gas expert at the Asian Development Bank and advisor for Cambodia’s National Petroleum Authority. “If it is sticky, the water will flow instead. So the oil recovery level is very low, and oil that has been recovered has no gas with it.”

The World Bank estimates Cambodia’s total offshore oil potential at up to 2 billion barrels in six blocks in the Gulf of Thailand.

Block A alone could hold 400 million barrels. It is under exploration by the US giant Chevron in cooperation with Japan’s Mitsui Oil Exploration and South Korea’s Caltex. The remaining blocks are under investment by 13 companies, from France, Kuwait, Sweden, Singapore, China and others.

Chevron is still leading in exploration, but the company has already encountered the problem of dispersion—where oil deposits are scattered in pockets underground, rather than in giant reservoirs.

Cambodia’s offshore crude is dispersed, “rather than in one core field, which makes investment hard,” said Men Den, deputy director of the Cambodian National Petroleum Authority. “So it costs more to produce oil.”

Meanwhile, McWalter said low crude prices could mean Chevron won’t be able to start pumping oil by 2011, as it once expected.

“Although all the planning has been done, the circumstances are so different now for the oil industry,” he said. “Even if you can submit the development plan tomorrow, you need more time to check and approve, and a long time to prepare. So it’s hard to believe that any company can produce oil in 2011.”

Chevron is the largest oil investor in Cambodia, spending more than $100 million to explore 6,000 square kilometers in Block A, which lies under the sea 140 kilometers southwest of Sihanoukville town.

Chevron spokesman Gareth Jonhstone told VOA Khmer the company would not discuss start-up dates, but Chevron and its partners in Block A were “working closely with the Royal Government of Cambodia to complete the fiscal and legal framework for the development of petroleum resources in Cambodia.”

While some skeptics warn that the potential billions of dollars from the oil fields must not be used to line corrupt pockets, experts point out the costs and risks of the ventures themselves.

The natural conditions for Cambodia’s oil blocks is not good, the price of exploration technology high and the value of crude oil dropping, McWalter said.

Phat Bunne, an oil and gas expert at the Cambodian Institute of Technology, agreed, saying offshore oil could turn out to be less than expected and deal failure to prospective companies.

Men Den said it all comes down to the price of crude.

“If the oil price falls, no oil [production] starts,” he said. “If the oil price decreases more, or even stays at the same low level, I believe none of the companies can go ahead."

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