PHNOM PENH —
Cambodia is unlikely to be able to produce offshore oil until prices rise, analysts say.
There’s potential oil in offshore areas, but with the low price of oil across international markets, and with the government failing to make deals with companies, it could be years before production occurs.
Offshore production has already struggled, with Chevron selling its shares of offshore exploration to smaller Singaporean company, KrisEnergy, in 2014. But it will take a lot before the company can start producing oil.
“It’s very clear that an agreement between KrisEnergy may be finalized in the next few weeks or months,” said Don Hubert, president of Resources for Development, Consulting. “But from that moment, KrisEnergy and its joint-venture partner need to decide a final investment decision. They sit down they look at all the data and then say, ‘Yes, we’re going to invest in Block A,’ and the clock starts.”
According to an economic analysis of Cambodia’s offshore Block A, conducted by his group, production there isn’t feasible unless oil prices recover to at least $70 per barrel. Crude oil right now is trading at $35 per barrel, and some economists predict it won’t bottom out until $20 a barrel. If prices ever fully recover, the Cambodian government could make up to $1.1 billion in revenue from the block, at $90 a barrel.
Meng Saktheara, a spokesman for the Ministry of Mines and Energy, said he agreed with that analysis. Negotiations over production are not finalized with KrisEnergy, which must also finish its own assessments of potential oil production, he said.