The Gulf of Thailand, Buried Treasure and the Temple Ruin
Thailand and Cambodia are neighbours with coastlines on the Gulf of Thailand and both have, for different reasons, a strong need to develop additional sources of indigenous hydrocarbons. Both countries have recognised that a potential solution to their needs lies in a vast, disputed area of the Gulf of Thailand.
Robert Chambers recently made an excellent post on the Oil & Gas Landscape of Thailand (https://www.dhirubhai.net/pulse/thailand-commentary-company-landscape-robert-chambers-p8kme/) which is well worth reading.
Inspired by this and amid rumours of an impending 25th Thai licensing round, negotiations over the disputed territory ongoing and a great deal of legacy data available to us in the area, we in Canesis Data have been taking a close interest in what is (or is not) likely to happen there in the near future. It was something of a surprise to discover that a potential threat to a resolution of this maritime issue, looms in the unlikely form of a remote, ancient ruin hundreds of kilometres from the coast.
The Overlapping Claims Area (OCA) is estimated to contain more than 12 trillion cubic feet of natural gas and over 600 million barrels of liquids and covers 25,000 km2 of the highly prospective Pattani Basin; the largest undrilled prospective resource of natural gas, possibly in the world!? Buried treasure indeed…..
Historically, Thailand has been blessed with abundant offshore natural gas resources with over 20 trillion cubic feet of gas produced, which has largely been used domestically to generate electricity for its 72 million inhabitants.? This has powered a period of prosperity for the country which is now in danger of being halted by declining offshore production (down 20% in 2022 and a further 8.8% in 2023 according to Fitch) and increasing its reliance on high emissions imported LNG and coal which are expected to provide 63% of its electricity generation by 2037.
Cambodia runs with coal and diesel powering much of its electricity generation and 20% of the population has no access to electricity at all. The country is highly dependent on imported hydrocarbons and, despite considerable efforts since 2010, no commercial oil and gas has been produced. Difficult reservoir conditions and unfavourable tax and licensing conditions make it unattractive to oil companies.
Thailand’s government is making efforts to halt their decline with the possible upcoming announcement of a license round and Valeura Energy has taken Mubadala’s old portfolio by the horns and is sending an additional offshore production unit to the Nong Yao field with first oil expected Q2 2024. It has also announced the further development of the Wassana Oil Field.
For Cambodia, securing an agreement on the OCA might be its best or only chance of prosperity.
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On the face of it, the issue centres on Cambodia’s claim to the southern part of Koh Kut (or Koh Kood) an island ceded to the Kingdom of Siam by the French Indo-China authorities in colonial times. Without that foothold on the island, the Cambodian claim to the largest part of the OCA falls away and with it the most prospective acreage in the area.
The simplest and most likely solution might be to opt for a Joint Development Area such as the existing successful arrangement between Thailand and Malaysia a short distance to the south. It isn’t straightforward though and one of the more extraordinary elephants in the room at these discussions comes in the unlikely shape of the ancient, ruined, Hindu temple of Preah Vihear in a remote and inaccessible area of the border.
The temple dispute stems from the 19th Century when both countries claimed the religious complex as their own but it was awarded to Cambodia. The situation has been a running sore with nationalists on both sides since then and has been a seriously complicating factor in frontier negotiations between the countries up to the present day. The issue flared up most recently in 2008 – 2011 when shots were exchanged between armed forces with casualties on both sides, but it has never been fully resolved.
The, seemingly unrelated, OCA dispute has been close to agreement in the past but stymied by coups and falling governments. Currently, with both countries identifying the beneficial impact of domestic gas production on the future of their respective economies, efforts have been renewed with reports in February 2024 that the Prime Ministers of Thailand and Cambodia had agreed in principle to set up a joint technical team to assess the OCA area.
It seems that there is a mutual determination to get a result this time and it really should be easily achievable – but if one party is backed into a corner it will be tempting to put Preah Vihear on the agenda as a tactic to kick discussions into the long grass.
If they can resist the temptation to open old wounds, we could potentially see the opening up of the best exploration acreage in the Eastern Hemisphere, if not the world! ?