Thailand, Cambodia to revive US$300 billion offshore oil field talks

The Pheu Thai-led coalition government is set to revive talks with Cambodia regarding the exploration of a contentious offshore oil and gas field, estimated to hold at least US$300 billion in reserves. This field has been a point of contention between the two nations since the 1970s.

Prime Minister Paetongtarn Shinawatra, who assumed office in September following the Constitutional Court’s dismissal of Srettha Thavisin, prioritised the joint exploration as one of her administration’s top 10 urgent goals. The initiative aims to address Thailand’s dwindling energy reserves, stabilise electricity prices, and reduce the ballooning fuel import bill.

Earlier this year, both countries agreed to negotiate the fair exploitation of the 26,000-square-kilometre block, which is believed to contain around 10 trillion cubic feet of natural gas and 300 million barrels of crude oil.

The negotiations face challenges due to past diplomatic disputes and concerns over sovereignty. Talks have been stalled since 2001 when it was agreed that territorial claims and joint resource development must be discussed simultaneously.

Despite these complexities, some Thai officials are optimistic that the pressing need to bolster domestic gas production and the narrowing window for fossil fuel usage will drive a breakthrough. They believe that starting exploration now and resolving territorial disputes later is a viable approach.

Finance Minister Pichai Chunhavajira stated in Parliament last month that Thailand does not need to resolve the different opinions on boundaries.

“We just need to have neighbourly chats and try to make use of the resources. That will boost security as well as cut utility costs.”

Oil field

Cambodia also expressed willingness to continue discussions. Government spokesperson Pen Bona emphasised this commitment in a statement to Bloomberg News.

“If the new government of Thailand is ready, we are happy to continue the negotiations.”

Thailand’s reliance on natural gas is significant, with 60% of its power needs met by this energy source. Domestic supply accounts for more than half of this demand but current consumption rates suggest the country could exhaust its gas reserves within five to 10 years. This concern is compounded by Thailand’s ambitions to attract energy-intensive industries like data centres, said Kurujit Nakornthap, executive director of the independent Petroleum and Energy Institute of Thailand.

“Without doing anything, we’ll need to import much more liquefied natural gas (LNG) to meet the demand for power generation.”

Kurujit added that the unexplored reserves could extend Thailand’s offshore gas supply by at least 20 years.

Revenue-sharing models have been proposed by both Thailand and Cambodia for the Overlapping Claims Area, which former energy minister Pichai Naripthaphan estimates contains resources worth at least 10 trillion baht (US$300 billion).

Successful negotiations could benefit major companies like Chevron Corp, Shell Plc, and Thailand’s PTT Exploration & Production Pcl, which secured concessions in the 1970s but have been unable to explore the disputed area. ConocoPhillips and TotalEnergies SE are also reported to hold concession rights in Cambodia.

Cambodia, despite its reliance on foreign fuel, has less urgency to expedite negotiations. The country lacks a substantial domestic oil and gas industry and will likely remain dependent on neighbours for energy imports.

Bangkok-based consultancy CLC Asia in a report last year said, “Regardless of the revenue sharing model, Thai producers and contractors would need to undertake the bulk of the work in the overlapping claims area, and Thai companies would walk away the biggest winners.”

Thailand has a precedent for joint exploration agreements. In 1979, it marked a 7,250-square-kilometre area for a joint development project with Malaysia in the lower Gulf of Thailand. However, the dispute with Cambodia remains unresolved. A Thai government spokesperson confirmed that negotiations are a priority but did not provide a timeline.

Critics argue that Thailand should first resolve the overlapping claims, similar to the approach taken with Malaysia, before discussing mutual benefits, reported Bangkok Post.

“If it proceeds, the negotiation won’t be finished but the government will,” warned former senator Somchai Swangkarn.

He believes any compromise on Thai sovereignty could lead to significant public backlash.

“We must negotiate delimitations first. That’s the only way.”