Cambodia trying to end dispute with Thailand

Aug. 1, 1999
The government of Cambodia is doing its part to settle a 25-year old dispute with Thailand over acreage in the Gulf of Thailand.

The government of Cambodia is doing its part to settle a 25-year old dispute with Thailand over acreage in the Gulf of Thailand. The two countries have been at odds over a 25,000 sq km zone overlapping the borders of both countries that is estimated to contain 10-11 Tcf of gas. The dispute has been in effect since Thailand awarded the first contract in the early 1970s. Now Cambodia, in what it calls the "interest of offshore oil exploration," wants to put an end to the dispute and begin production in the zone waters before interest wanes. Cambodia has said that there are two main options for resolving the dispute:

  1. The first is to disregard the disputed line and consider the whole area as overlapping. Then, the countries would apply the model joint development agreement used for the Thailand-Malaysia overlapping area in which each country would share the area equally. This is the method Cambodia is pushing, in an effort to decrease the time needed to reach an agreement. Government representatives have speculated that this would take about one year.
  2. The second is through justification of the lines. This involves each country justifying claims, a method that Thailand supports. Cambodia believes this will take more than two years for resolution.
Cambodia has prepared the necessary documents for the first method, even if justification of the claim is the chosen method. The Prime Minister of Cambodia has called on the government of Thailand to help resolve the dispute.

Apache, XCL in dispute over China acreage

Development of the Zhao Dong block in Bohai Bay offshore China may be delayed for a while. The China subsidiary of US-based Apache recently filed a petition in the US Bankruptcy Court to place XCL-China into involuntary bankruptcy for failure to pay more than $10 million owed to the company since November for costs associated with the project.

Apache claims XCL admits to being in arrears on $7.3 million owed to Apache through May. Also, Apache alleges that XCL may not have funds sufficient to cover the company's working capital requirements and capital expenditure obligations on the Zhao Dong and Zhang Dong blocks during the rest of this year. XCL has denied both implications.

Apache estimates the project will require an additional investment of $150 million.

China National Oil and Gas Exploration and Development holds 51% in the block. Apache is the operator of the block with a 50% interest in the 49% foreign contractors investment in the block, while XCL holds the remaining 50%.

Vietnam preparing new bidding round

Vietnam's state-owned PetroVietnam says it will soon open a tender for five offshore blocks. The company said that blocks 09-2, 09-3, 16-1, 16-2, and 52 offshore Vietnam would be open soon for tenders. PetroVietnam indicated that it has received several letters of intent, but did not specify from which companies.

Blocks 09-2, 09-3, 16-1, offshore Vietnam may soon be on offer.
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The tenders would be granted under joint operating company terms, an agreement framework that replaced production sharing contracts last year. The joint operating company framework establishes a non-profit firm that rents or buys equipment from indigenous companies. This new framework has not been well received by industry, especially with Vietnam's establishment of a value-added tax. Only one joint operating company agreement has been signed since its inception and it has been closed. The bidding round is part of the country's goal of increasing production by 2 million tons of oil this year.

Harrods begins Thai drilling program

Harrods Energy concessions offshore Thailand.
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Mohammed Al Fayed apparently is looking for new ways to spend his money. The billionaire financier and owner of the world famous Harrods department store in London, has established his own oil company called Harrods Energy and has begun exploration efforts in the Gulf of Thailand.

Harrods Energy was formed last year when Fayed purchased a 50% stake in an offshore block from Thailand's PTT Exploration and Production. Since that time, Harrods has shot 2D seismic over three blocks in the Gulf: B11/38, B12/32, and B5/27. In addition, Harrods has acquired the concessions for a reported $100 million and has been granted approval as operator by the government of Thailand.

Harrods Energy is now in the process of a five-well exploration program on the acreage. Two wells have already been drilled on Block B11/38 and a third is in progress on B5/27. The company is currently evaluating the results of the B11/38 wells and expects the third well to be completed next month.

Australia updates regulations

The Federal government of Australia has announced that it is going to update its existing Petroleum Submerged Lands Act to adapt to the technological changes in the petroleum industry and growth in the LNG markets. The main change in the Act would be the introduction of infrastructure licenses for projects not covered in existing licenses. This would include projects such as the offshore processing of LNG as originally proposed sometime back by BHP and the conversion of gas to methane and ethanol.

The government also announced a tightening in the regulations for the renewal of exploration permits and changes in the terms of pipeline licenses. The current exploration permits require companies to abandon half of the initial exploration area licensed with each five-year extension with the exception of the final 16 blocks in the permit. The new regulation would cause the license-holder to eventually surrender all the blocks, including the final 16. For the new pipeline license regulation, the government is planning to retract the fixed 21-year term of pipeline licenses in exchange for an indefinite term.

China seeking final approval on first LNG

China National Offshore Oil (CNOOC) is in the process of seeking final approval on the country's first LNG project. A project proposal was submitted to China's State Development Planning Commission in April for approval and is expected to be granted within the month. Following approval, CNOOC plans to create a joint venture company by next year to finance the project and will begin inviting bids from interested foreign parties. A six to nine month feasibility study would then be carried out on the project and would have to be approved by the Chinese Cabinet, which CNOOC expects this to happen by June of next year. CNOOC is expected to hold 36% of the interest in the joint venture, with local companies holding an additional 29% and foreign investors taking 35%. The project is expected to be completed by 2005.