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Resource Watchdog Warns of Weak Laws for Oil and Gas

Japan Oil, Gas and Metals National Corporation (JOGMEC), a Japanese oil company, has been granted a rights by Cambodia Tuesday, May 4, 2010, to study a survey for possible oil onshore at the basin of Tonle Sap lake, or "Great Lake," the largest freshwater
Japan Oil, Gas and Metals National Corporation (JOGMEC), a Japanese oil company, has been granted a rights by Cambodia Tuesday, May 4, 2010, to study a survey for possible oil onshore at the basin of Tonle Sap lake, or "Great Lake," the largest freshwater

[Editor’s note: Cambodia is hoping to begin petroleum production in the next few years. But critics warn that the revenue from this vast natural resource will only enrich the powerful if proper steps aren’t taken to share the wealth with the rest of the country. George Boden is a campaigner for Global Witness, an award-winning, internationally recognized watchdog organization.]

When Thailand’s new prime minister, Yingluck Shinawatra, visited Cambodia last week, Global Witness said it was concerned over 27,000 square kilometers of overlapping offshore blocks slated for petroleum exploration. Why?

I think it is important to say that we don’t have any specifics on the deal itself. We don’t wish to comment on that. Certainly we see a resolution or an agreement over the Overlapping Claim Area as something potentially hugely positive for both Thailand and Cambodia. It’s reckoned to be probably where some of the most lucrative oil fields in the region are. And potentially huge revenue could come from that, which could be used for public services and development both in Thailand and in Cambodia. So certainly in some ways it’s a very positive thing.

What is the concern then?

Our real concern lies in the history of natural resource management in Cambodia. What we and others have documented over many years is chronic mismanagement of natural resources and high-level corruption in the allocation of concessions and rights for both oil and mining. In our last report, “Country for Sale,” we show how millions of dollars in payment relating to the oil industry was simply going missing and deals had been struck behind closed doors. Now the real question is here. What is going to happen when the deal is struck of the [Overlapping Claim Area].

Different companies already have rights to the area on both sides. So both the Thai side and Cambodian side have rights to the same waters. Now companies will probably be able to strike deals quite quickly with each other. This would mean probably a whole new round of contracts, new payments being made, with the prospects of substantial revenues coming online once the drilling is being conducted, which will be in a few years’ time.

The real worry is that the same pattern that was already taking place in Cambodia will happen again. Money will go missing, deals will be struck behind doors. Rather than the money being used for the benefit of the Cambodian people, it will simply line the pockets of the small corrupt elite once gain.

What would you recommend the government do so that the money goes to national coffers and contributes to real socio-economic development and other public services?

Certainly, what we would call for is a moratorium on any future deal struck in the oil industry in Cambodia. We would like to see the review of all of the existing contracts that exist and an explanation of how those took place and also what payments were received from oil companies and what those payments have been used for.

And then what we would like to see are proper, sound legislative and regulatory structures which are fully transparent so it is totally clear how much money was being received by the government of Cambodia and that that money could be tracked as it went through budget to ensure that it was spent appropriately by the authorities and none of that money was being embezzled.

And we would like to see things like proper social and environmental safeguards in place to make sure the oil industry in Cambodia doesn’t create any damage to the environment or to any social conditions. That said, in regards to the OCA, given it’s so far offshore, the major concern would really be revenues, and it would be how deal was struck, who got the deal, whether they’re good deals for Cambodia, are they negotiating good contracts with these oil companies, and is the money that’s being paid by those companies to the government making its way into government accounts and being used for budget?

At the moment we don’t have the laws in place, we don’t have regulatory structures in place to deal with that, and there is complete lack of transparency both in the allocation of concessions, but also in the money received. And that really needs to change if the money is going to benefit ordinary Cambodians.

You have said the Cambodian government has a track record of corruption, and that its oil laws are not fit for their purpose. Could you please elaborate?

The Cambodian government has been promising to bring forward the new petroleum law for many years—the old one dating back over ten years at least. And while the Norwegians and others have been working closely with the Cambodian government to try to get a law out which does cover all of the things I just discussed—proper environment and social safeguards, proper revenue management, provisions for fair and open transfer of rights for oil and gas.

We haven’t seen that law passed; we haven’t seen it put in place.

We understand that the tax laws, as they exist, do not necessarily adequately cover the oil contracts. We don’t have access to those oil contracts; they’re not publically available. It’s unclear what the terms of those deals are.

So there’s a real problem, without knowing exactly what kind of contracts are being struck and how the laws interact with those contracts. But also the laws just are not up to date, they are just not in place to deal with the allocation of concessions, the building of refineries, pipelines, structures, things like that, but also in terms of revenue management as well. There is a lack of clear structural and legislative guidelines and laws and rule to government sector. And this law hasn’t passed and we’re still waiting to see that.