Singapore-based oil and gas company KrisEnergy and the government of Cambodia have signed fiscal and technical agreements for the country’s first oil field development in Cambodia Block A in the Gulf of Thailand.
Earlier this month, the government approved the signing schedule for the petroleum agreement for the offshore block with KrisEnerg, which is the operator of the Block A since 2014.
On Wednesday, KrisEnergy informed the agreement had been signed. The company plans to develop the Apsara area in the north eastern section of the concession, which is one of seven geological trends in the license where there is potential for oil and/or gas to be trapped.
Under the terms of the agreements, KrisEnergy has 60 days to declare a final investment decision thereby signalling the formal launch of the Apsara project, which is expected to take up to 24 months to produce first oil.
Under the formalized terms, a 5.0% participating interest in Cambodia Block A transfers to the government of Cambodia and will be held by the General Department of State Property and Non Tax Revenue of the Ministry of Economy and Finance. KrisEnergy holds the remaining 95% participating interest.
The agreements also trigger the second relinquishment phase of the concession, whereby 1,626 sq. km, or approximately 25.0% of the Cambodia Block A area, is returned to the authorities leaving 3,083 sq. km under the operatorship of KrisEnergy.
“The signing of the fiscal and technical agreements between the Government and KrisEnergy for oil production in Block A is the culmination of years of work and endeavour by all parties involved and we are very proud of the outcome. Producing Cambodia’s first oil in its offshore waters will be a major step along our steady road to economic development and national prosperity and is aligned to the Government’s key development goals,” said H.E. Meng Saktheara, Secretary of State for the Ministry of Mines and Energy and Chairman of the Inter-Ministerial Committee for Block A.
H.E. Chou Vichet, Secretary of State for the Ministry of Economy and Finance and Vice-Chairman for the Inter-Ministerial Committee for Block A, commented: “Now we are starting to develop a new oil and gas sector that will help increasing state revenues and job creation that will contribute to boosting our Cambodian economy further. We congratulate KrisEnergy for its efforts and dedication to make the oil and gas development project in Cambodia Block A a reality.”
Kelvin Tang, KrisEnergy’s Chief Operating Officer and President of the Company’s Cambodian activities, said: “There has been great interest in this project from many stakeholders and related parties and we are delighted to have reached this stage. I would like to thank the Ministry of Mines and Energy, the Ministry of Economy and Finance and the Inter-Ministerial Committee for Block A for their close cooperation and advice, which has resulted in the successful formalization of the terms and conditions.
“We are proud and honored to be the operator of this landmark project, which will be an historic milestone for the economy and people of Cambodia as well as for KrisEnergy. Our technical and project teams have a successful track record of bringing greenfield oil developments in the Gulf of Thailand into production on time and to budget. Apsara marks only the first phase of the development of Cambodia Block A, there remains further potential in other geological trends within the contract area for future investigation.”
The Cambodia Block A contract area covers 3,083 sq. km over the Khmer Basin in the Gulf of Thailand where water depths range between 50 meters and 80 meters. Phase 1A of the Apsara development consists of a single unmanned minimum facility 24-slot wellhead platform, the Platform A, producing to a moored production barge capable of processing up to 30,000 barrels of fluid per day with gas, oil and water separation facilities on the vessel. The oil will be sent via a 1.5 km pipeline for storage to a permanently moored floating, storage and offloading vessel from which sales liftings will take place.
Platform A will be located to provide access to all potential well locations, maximize access to the current known oil resources and to maximize the potential resources accessed by each future platform. Initially it is envisaged that 20 development wells will be drilled in the Phase 1A stage.
According to the operator, the individual oil accumulations in Cambodia Block A are small in size and spread over a large geographic area, requiring significant funds and time to fully develop. Additionally, reservoir production performance in the Khmer Basin has yet to be proven. For these reasons, among others, there is some uncertainty regarding long-term production rates, reserves and commercial viability and therefore a phased development approach has been prudently adopted, KrisEnergy explained.
Once the initial Phase 1A platform is on stream, there will be a period to monitor reservoir performance before starting Phase 1B, which envisages up to three additional wellhead platforms producing to the Phase 1A facilities. A Phase 1C will potentially add up to six additional platforms for the full 10-platform Apsara development.
Safety plans have been developed to cover all aspects of Health and Safety during the design, construction and operation of the facilities. An Environmental Impact Assessment (EIA) was conducted in accordance with Cambodia Environmental Law and Regulations and approved by the Ministry of Environment on 29 May 2013. KrisEnergy intends to review and update the existing EIA to take into account the development work program. Subsequent to any revisions of the EIA, a management plan will be adjusted to ensure compliance with environmental regulations and to mitigate potential significant impacts.
‘Paving the way for Cambodia’s first oil development’
Commenting on the deal, Jean-Baptiste Berchoteau, research analyst, Asia upstream, Wood Mackenzie said: “Cambodia has signed a revised PSC for Block A of the Apsara oil development with Singapore E&P player KrisEnergy, paving the way for Cambodia’s first oil development, three years after the start of long negotiations.
“KrisEnergy will benefit from more attractive fiscal terms than the default Cambodian terms notably in terms of income tax, tax holidays and export duty. These revised fiscal terms are on par with other SE Asian countries, and it is still premature to say whether or not this agreement could attract more upstream investment into Cambodia.
“KrisEnergy is expected to make a Final Investment Decision (FID) in the next two months and aims to deliver first oil two years after FID. Given the relatively small size of the field, executing the project on time and on budget will be crucial to achieving a positive return on the investment.
“In order to generate much-needed cash flow and reduce capital expenditure, it has announced its intention to farm-out up to half of its stake in the block. With the fiscal terms for the block now clarified, we expect interest in the project from both local and international players.”