Cambodia Leader Warns Against Oil Dreams

By Ker Munthit, Associated Press Writer
Cambodian Deputy Premier Warns Against Dreams of Easy Riches From Potential Oil Bonanza

PHNOM PENH, Cambodia (AP) -- Cambodia's dream of seeing money flow from the discovery of oil will not come true overnight, a deputy prime minister said Thursday, in the latest warning against excitement over an anticipated oil bonanza.

The country will also remain dependent on petroleum product imports of around one million tons annually for years to come, said Sok An, a Cambodian deputy prime minister, in a speech at an investment conference.

While Cambodia cherishes a hope to have sufficient oil reserves to start domestic production, "we are cautioned by experienced oil men to be most cautious in our expectations," Sok An said. "We shall have to wait and see."

Offshore oil has been a much-talked-about topic in Cambodia in recent years following a discovery by U.S. energy giant Chevron Corp. in 2005. Companies from Australia, China, France, Indonesia, Malaysia, Singapore and South Korea have also expressed interest in exploring Cambodian seas for oil, and the government wants to use oil revenue to develop the country and reduce poverty.

Annual per capita income in Cambodia doubled to US$513 (euro348) in 2006 from US$247 (euro168) in 1994, but the country remains among the world's poorest. Some 35 percent of its 14 million people live below the national poverty line of just 45 U.S. cents (euro0.31) a day.

And Sok An's comments may mean expensive imported fuels will continue to burden the country. Standard quality gasoline stands now at 4,350 riel (US$1.07; euro.73) a liter; premium is at 4,450 riel (US$1.1; euro.75) per liter.

The Cambodian government is trying to manage expectations amid uncertainty over the oil discovery, said Sin Foong Wong, the country manager of International Finance Corporation, an arm of the World Bank.

"It's a fine line they're trying to sort of tread. On one hand, we don't know really the size of the discovery and it will take time to appraise it, but at the same time they are also cautiously optimistic," he said.

Chevron has been conducting exploration in an offshore area called Block A, about 200 kilometers (77 square miles) west of Sihanoukville, Cambodia's coastal city 185 kilometers (115 miles) southwest of the capital Phnom Penh.

The company has so far drilled 15 wells in the area and is appraising the discovery to determine the extent of the reserves, Sok An said. Even if the find proves commercially viable, first oil production will not commence until "early next decade," he said.

"Of course, we all hope that the technical results of Chevron's evaluation of its discoveries will be good for Cambodia," he said.

But "until there are firm field development plans on the table, we should not consider any of the oil discoveries as constituting proved recoverable reserves," he added.

A total 27 wells have been drilled offshore Cambodia, Sok An said, without revealing other companies involved in exploration work.

Critics and observers have expressed concerns that income from oil could exacerbate Cambodia's already widespread corruption if the government fails to develop proper legal environment to manage the expected revenues.

"People worry maybe the government's going to squander" oil revenues, said Andrew Symon, a senior adviser of Menas Associates, a British consulting firm. Symon, whose work focuses on energy and natural resources, is based in Singapore.