Wednesday, 30 September 2009

Energy remains in short supply

Photo by: Heng Chivoan
A pump attendant fills a car with fuel at a Tela petrol station in Phnom Penh this month. Energy multinationals remain locked in talks with the government over oil and gas concessions in the Kingdom.

We’re on the way to finishing the negotiations, it is going smoothly.

(Post by CAAI News Media)

Wednesday, 30 September 2009 15:01 administrator

CAMBODIA remains years away from realising its energy reserves and is still one of the least-connected in terms of energy supplies in the region, government officials and energy company executives said Tuesday.

During the first day of a conference on energy in the Greater Mekong Subregion (GMS) organised by the US embassy in Phnom Penh, participants said that the Kingdom continues to suffer from inadequate energy resources and emphasised the need to improve supplies in order to boost economic growth.

“Energy prices here are among the highest in the region, and connectivity among the lowest,” US Ambassador Carol Rodley said in an opening address.

The sub-region as a whole – which includes Cambodia, Vietnam, Thailand, Laos, Myanmar and the Chinese provinces Guangxi and Yunnan – would require “billions of dollars of investment” in energy to meet demand in the near future, she added.

The Asian Development Bank’s Dr Yongping Zhai, a lead professional in energy for the Southeast Asia Department, said the GMS region would see demand for energy increase between 9 and 20 percent in the coming years, with Vietnam the most power-hungry member of the Mekong region.

In Cambodia’s case, experts said that energy production remained minimal, with littleto suggest the situation would be rectified soon without relying on imports.

“Cambodia has diverse resources, including hydropower and natural gas, but [it has] yet to fully develop,” Yongping said in his presentation to delegates, which included US energy giants Chevron, General Electric and ConocoPhillips.

Once Cambodia develops its resources, it will have “much greater scope” for interconnection with other GMS members such as Thailand, he said. The spread of energy resources within the GMS region was one of the main themes of the conference, which ends today.

In highlighting Cambodia’s energy deficiency, Phalla Phan, deputy secretary general of the Supreme National Economic Council, reiterated that “the electricity price is very high” in Cambodia compared to that in Vietnam and Laos.

Last year, Cambodia imported 57 megawatts, he said – 73 percent of which was from Thailand, with the remainder from Vietnam – and plans to increase imports in the coming years as demand increases. Cambodia also plans to import electricity from northern neighbour Laos in the longer term, he added.

Cambodia suffers from a fragmented power grid, with most resources concentrated in Phnom Penh, said Phalla Phan. Outlying areas suffer from low connectivity rates or rely largely on imported fuel to fire generators to produce electricity, he added.

The result is a costly supply. The average price of Cambodian electricity is $0.16 per kilowatt/hour but that can rise as high as $0.90 per kilowatt-hour in remote rural areas, said Phalla Phan, resulting in among the highest electricity bills in the Mekong basin.

Vietnam in May agreed not to raise the price of its electricity exports to Cambodia before 2011, but fuel prices continue to soar on the back of a rebound in global crude prices.

Petrol prices are up 33.9 percent in Cambodia this year, according to Ministry of Commerce figures obtained by the Post Tuesday, while diesel is up 21 percent over the same period. Both products are imported, mostly from Singapore and Thailand.

Analysts agree that there is little prospect of Cambodia realising its fossil-fuel deposits in the short term, as major energy companies remained locked in negotiations with the government over concessions that remain years from production.

US-based Chevron, which says it has spent US$125 million on seismic data in the Gulf of Thailand and has drilled 15 exploratory wells in offshore Block A, indicated Tuesday there was still no sign of an end to its negotiations with the government for a contract extension.

“Our position is unchanged. We’re still in discussions,” said the company’s regional spokesman, Gareth Johnstone, declining to disclose more information because of the commercially sensitive nature of the ongoing talks in Phnom Penh.

In its promotional material at Tuesday’s event, Chevron said it expected to drill more exploratory wells in the future.

French oil and gas company Total said Tuesday it was also still locked in slow negotiations with the government.

Total to sign soon
Jean-Pierre Labbe, the firm’s head of upstream operations in Cambodia, said, however, that the end was in sight regarding talks to sign over offshore Area III and Block 26, which occupies an area in the southeast of the Kingdom.

“We’re on the way to finishing the negotiations; it is going smoothly,” he said. “It is a problem of technical delays and the date [on which to sign the deals].”

He added that Area III, which lies in a disputed area with Thailand, would be signed first followed by Block 26.

With no news of a settlement between Phnom Penh and Bangkok over the overlapping area, Cambodia still potentially has 27,000 square-kilometres of offshore concessions that cannot be explored.

Although Cambodia first began exploration for oil and gas in the 1950s and first drilled wells between 1972 and 1974 courtesy of French company Elf, it has never produced its own supply.

The latest estimate by the government suggests the first reserves – almost certainly from Block A – are unlikely to start production until 2013 at the earliest.

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