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Cambodia First Oil: One Should Not Contemplate About Money In The Pocket

Because of its value in creating wealth, oil resources are considered as a national treasure. Yet, it is exactly more like a poor family with recent discovery of a treasure under their bed. One can imagine of any possible things that could happen to this family. But in all scenarios we can categorize all possible futures of the family into 3 possibilities:

  • being robbed and torn apart,
  • Being victimized with the so called wealthy sickness, and
  • Being a wealthy and prosper family.

Learning from the world history of oil producing nations, one would have a good reason to raise concerns about whether such discovery of treasure becoming a blessing or a curse. Resource curse is a scary story for all resources based economies, especially poor countries, but, it does not make sense too that one won’t make any use of the treasure in his disposition just because such scary story. It is obvious that, a nation who is blessed to have such resources should focus on how those concerns and scary stories can be overcome and the resources can be utilized in a way that can bring prosperity to the whole nation.

In Cambodian case, the discovery of Block A commercial oil fields for the first time in its history have sparked so much excitement, expectation and speculation, in which issues of resource curse is one of the major concerns too. The country is still very new or inexperienced in dealing with this business. There is no industry of the type exists yet. Domestic capacity in this industry is also lacking and non-existing in most of the key specialized fields. All these shortcomings could put Cambodia in a disadvantageous position, especially in protecting its rightful interest against international oil company. Despite all these facts, I believe the country should make its start somewhere or it won’t never be able to profit from its natural treasures. This starting point is a striking balance between ambition to create wealth and opportunities to build national industrial capacity.

There were so many questions asked by public about what would the country receive from the development of first oil field of Block A. While many are concerns with how much revenues the state would receive, would people receive gasoline subsidies like some oil producing countries, or would salary level be increased, etc. I think there is more other pressing matters to be addressed by the whole nation than those about immediate and individualizing vest interests. In stead of looking at how to enjoy the money flows into everyone’s pocket, Cambodia should really take this opportunity to look for building national capacity in petroleum industry if it wants to create a long term and inter-generational benefits for its people.

Unlike many other oil producing countries, the discovery in Cambodian block A is marginal. The development will be in stages and phases. The declared commercially proven reserve at the first stage, Phase 1A, is merely around 8 millions barrels. This means the first few year of production would be very minimal and very unlikely to bear any impacts on state budget position. If phase 1A is successful and phase 1B and 1C are confirmed with additional commercial proven reserves, then the total estimated producible reserve would be around 31.8 millions barrels. This is still very small size to compare with all other oil producing countries. The total estimate state revenues of all phases, 1A, 1B & 1C, for a duration of 10 years are around 750 millions USD, roughly about 75 millions USD per annum. This amount can significantly help increasing national budget space but far too small to drive the whole economy or to call Cambodia as a resources based economy.

In fact, such progressive steps of developments and small size startup provides a great opportunity for Cambodia, as a nation, to catch up the world in creating its domestic industry capacity. There is tremendous tasks ahead to fulfill this goal. Among all, building national managerial and regulatory capacity is utmost importance. the task includes both institutional capacity and legal systems for the sector. There is remedies of resource curse fear given by international practices. Those remedies all are grouped in these 3 folds: good governance, sound macro-economy policy management, and, national sovereignty. A system of institutional capacity in both legislative and executive branches of the country must be built to promote more check and balance accountability for the sector performance. The adoption of petroleum law is an important first step, however, Cambodia should also look at complementary of its current laws and regulations of relevant sectors as well as adopting relevant international legal initiatives to indemnify and protect itself in international cases. In addition, domestic industry capacity such as national oil company and other sector servicing and supporting industries must be created. Surely in a long run Cambodian will need a lot of engineers, economists and specialized experts in this petroleum industry. Such capacity development takes times, and, we better start now.

Another important area of national capacity is the country preparedness during incidents and emergency cases. This requires building specialized bodies within countries and working with all regional and international capacity and resources. For this, Cambodia will need to build up additional specialized mechanism in house, revisit and/or create additional legal framework and rectify necessary international treaties to deal with such cases.

With all these in mind, I don’t think we have time to entertain ourself with emotional feeling of either fear of resource curse or with excitement about wealth to be created by our first historical oil. In fact, we should make sure our beginning of a very big journey of our country in this industry is sound and safe. The adoption of the petroleum law is just a small milestone yet important one in such journey.

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