This is the chapter 12 out of 19 chapters of our Cambodia Investment Guide. Learn the best way to invest in Cambodia. Download the full publication here.
Chapter 12.1: Natural Resources and the Environment
The regulatory framework for the use and protection of Cambodia’s vast natural resources has grown considerably in recent years. This framework is expected to continue to expand in the future as this sector receives financial support from external aid. This section outlines the regulatory regime currently in place. Keep in mind that because of the technical and complex nature of regulations in this area, implementation and enforcement can be inconsistent.
1. Oil and Gas
At present, Cambodia does not have a comprehensive petroleum law. Under current legislation the government body in charge of petroleum is the Ministry of Mines and Energy (“MME”) (formerly known as Ministry of Industry, Mines, and Energy (“MIME”) prior to 24 December 2013 and also incorporating the Cambodian National Petroleum Authority (“CPNA”)). Although new legislation governing the petroleum sector is currently being drafted, the industry is still governed by the Petroleum Regulations (1991).
Amongst other things, a General Department of Petroleum (“GDP”) was established under the MME to carry out central administration of the MME and deal with the day-to-day administration of the petroleum resources and petroleum products sector. This covers all activities related to oil and gas industries for both upstream and downstream activities in Cambodia. The Ministry sets coordination procedures at the working level among the General Department of Petroleum and other ministries of the Royal Government of Cambodia. The introduction of inter-agency working groups will allow cooperative application of resources to support processes for each activity required such as approval, compliance and inspection. Finally, the General Department of Petroleum is making progress through building its capacity to store, manage and utilise sovereign geological information on Cambodia’s petroleum resources.
The Petroleum Regulations still constitute the core legislation regulating petroleum activities concerning crude oil, natural gas and other liquid, gaseous, solid or semisolid hydrocarbons in their natural state. The Petroleum Regulations were subject to subsequent amendments in 1995 and 1999 revising the bidding procedures and the process of selecting contractors. In addition to the Petroleum Regulations, the draft model Production-Sharing Contract (“PSC”) is also currently in use in Cambodia and was adopted by the General Department of Petroleum to provide comprehensive guidelines for the petroleum sector.
The State’s mineral rights to natural gas are now vested in the GDP. As part of this integration of the CNPA with the supervision of the MME, all agreements and contracts entered into by the CNPA continue to be valid.
The present investment regime for the exploration of oil and gas and infrastructure projects in Cambodia is based on regulations and PSC’s. Each project is considered by the GDP on a case-by-case basis and upon negotiable terms. In assessing any bids, the GDP will examine in particular (i) the financial standing; (ii) the technical competence and professional experience; and (iii) the experience in marketing petroleum products of the bidder as well as (iv) the proposed minimum work and expenditures during the exploration period; (iv) the proposed allocation of petroleum; and (v) any proposed educational and training facilities to be created.
Presently, under Sub Decree 576 on the Organization and Functioning of the MME, this section is governed by the GDP under the auspices of the MME.
The GDP is authorized to determine petroleum zones for exploration, oversee bidding for petroleum-related activities, negotiate and execute petroleum contracts and to audit the financial situation of petroleum operating contracts, including the right to inspect equipment and review the results of exploration. The GDP is also mandated to prepare commercial regulations on price and promote competition.
In late 1997, the GDP granted conditional licenses to five companies to drill in four blocks in the Overlapping Claims Area, a contested zone in the Gulf of Thailand subject to competing claims by Cambodia and Thailand. The right to drill was conditional on an agreement between the two countries.
A memorandum of understanding was signed in 2001 between the two countries regarding the Overlapping Claims Area. This memorandum recognizes the existence of the overlapping area and states the intention of the two countries to conclude an agreement for the joint development of hydrocarbon resources located within this area. This memorandum should pave the way for further development of this area. Discussions and negotiations are still underway relating to revenue sharing and sectors to be covered by the joint developments.
In the non-contested area, the Cambodian government has demarcated six offshore blocks for licensing. Contracts have been awarded to five of these six offshore blocks thus far (blocks A-E). The contract for Block F is under negotiation with CNOOC Limited. Block A, which was awarded to Chevron and its partners in March 2002 is reported to contain an estimated 700 million barrels of oil and 3-5 trillion cubic feet of natural gas. For other blocks, estimates are not available yet and it may take another few years until data on those blocks is released.
While the attention of foreign oil firms over the past decade has been on offshore blocks, new data on the Tonle Sap Basin as well as improved security in the countryside mean that new exploration opportunities exist in this untested frontier. The Tonle Sap region has long been thought to be a promising prospect for hydrocarbons and is receiving greater foreign interest.
While the investment regime for oil and gas is governed by the Petroleum Regulation, importation and supply of fuel and LPGs (as final products) are not governed by this regulation.
Chapter 13 : Contract Law and Enforcement
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