SINGAPORE - A face-off between troops from Thailand and Cambodia over contested
territory immediately surrounding an ancient temple on their mutual border
threatens to delay even longer the resolution of a more economically
significant border dispute between the two sides.
Tension over the temple complex, known in Thailand as Preah Vihear, escalated
this month when it was listed as a United Nations Educational, Scientific and
Cultural Organization national heritage site.
To the south, a 27,000 square kilometer area in the northern Gulf
of Thailand known as the Overlapping Claims Area (OCA) and potentially rich in
fossil fuel reserves has long been contested by the two countries. Moves to
resolve the problem now risk becoming unraveled in the deteriorating political
climate at a time both countries' economies desperately need new domestic
sources of fuel.
Issues related to national prestige and contested histories have long prevented
any binding resolution to the maritime dispute and energy analysts and
executives worry the recent temple row could complicate dealings over the OCA,
where multinational energy companies have been granted overlapping concessions.
The economic stakes surrounding the competing claims have grown as global oil
prices have surged.
Thailand is proportionally one of Asia's largest oil importers, with the bill
for oil imports accounting for 12% of its gross domestic product (GDP), and it
now faces a growing gap between indigenous fuel supplies and surging demand for
power generation. Cost-push inflation, driven by rising global oil prices, is
starting to weigh on the country's economic growth, which is expected to slow
dramatically over the next year.
For underdeveloped Cambodia, revenue from petroleum production would be
enormously beneficial to its economy, while gas supplies could help to reduce
its current over-reliance on expensive diesel and oil for power generation.
High global oil prices are also taking an inflationary toll on Cambodia's
recent strong growth, with headline inflation up to 18.7% in January, the last
time the government released official figures.
Previous speculation that Cambodia might be on the verge of an oil-and-gas
bonanza, related to a find (outside the disputed area)made by US energy giant
Chevron and announced in January 2005, has been tempered by the company's
reluctance to provide hard estimates or to commit to a production start-up
date. Chevron has said it is "working hard to find a solution to develop the
complex reservoir" that is "scattered over small dispersed fields" rather than
"one core area".
Companies that have explored other offshore Cambodian blocks have yet to report
positive results, leading many geologists to believe that the OCA's
concentrated resources are the maritime area's main prize.
One Singapore-based international lawyer working with petroleum companies in
the region told Asia Times Online that "negotiating joint development areas is
a politically sensitive activity at the best of times. Governments run the risk
of being seen by some as compromising sovereignty and giving away the nation's
riches."
"In light of the recent developments around [Preah Vihear] and the tensions
[that the temple dispute] has caused between Thailand and Cambodia and
domestically, it might be a difficult time for any progress to be made on the
OCA."
The two countries share a conflicted past. Despite their shared cultural links
through Theravada Buddhism, Cambodia has long viewed Thailand as a threat,
dating to when marauding Siamese troops destroyed the Angkor kingdom in the
14th century and in later times when it took control of large swathes of what
is currently west and north-western Cambodia.
The unresolved OCA dispute, as with the row over Preah Vihear, an 11th-century
Hindu temple, has its origins in borders set over a century ago between
Thailand and France, then the colonial ruler of Cambodia, Laos and Vietnam.
Thai objections to those boundaries, including claims in the northern areas of
the OCA drawn perpendicular to each other, have prevented any exploration in
the contested waters since 1974.
Unexplored acreage
Nonetheless, geologists with knowledge of the field say that there are good
prospects of it holding both oil and gas, with one describing it as "the best
unexplored acreage left in Southeast Asia". The area represents a continuation
of geological structures in adjacent Thai waters that have produced large
volumes of oil and gas for several years.
The OCA lies in relatively shallow waters less than 80 meters deep, with oil
and gas deposits believed to be mainly in the north, while the south is thought
to be more gas and condensate prone. Broad estimates of the energy prize from
various sources in the petroleum industry have ranged from anywhere between 8
trillion to 15 trillion cubic feet of gas and 400 million to 1,000 million
barrels of liquid fuels, including oil and condensates.
These figures are highly speculative in the absence of detailed explorations
that neither Thailand nor Cambodia has allowed. Efforts to resolve the dispute
made some headway in 2001 when the two sides signed a memorandum of
understanding agreeing that a joint development regime could be established
over the southern two-thirds of the OCA, while the northern third could be
developed once the maritime border was delineated.
Subsequent Thai demands that the northern OCA border must be agreed on before
any joint development activities take place in the south have stalled
negotiations. Thai negotiators have proposed that the disputed area be divided
into three strips running north to south with the revenue from the central area
shared equally. The share from the outer areas would be weighted in favor of
the country adjacent to that area.
Because the most fuel-rich areas are believed to be in the OCA's western
region, such an arrangement would favor Thailand. For its part, Cambodia has
proposed dividing the area vertically down the middle and then six times
horizontally to create 14 blocks from which revenues would be shared equally.
Along those lines, each country would be responsible for managing seven of the
14 blocks, which would be allocated checkerboard style.
Thailand has refused to accept equal division and has openly argued for a
greater share of the OCA's fiscal benefits. According to a study by United
Kingdom-based petroleum industry consultants Wood MacKenzie, 85% of the OCA's
overall economic benefits would likely accrue to Thailand under a joint
production agreement, based on the assumption gas would flow into that
country's existing comprehensive pipeline system in the Gulf.
Over the years, both sides have awarded exploration blocks over the same areas
to multinational energy companies, including ConocoPhillips and Chevron, both
US-based, British Gas, Australia's BHP Billiton and Japan's Idemitsu, Inpex and
Moeco.
None of these companies has relinquished those overlapping claims, pointing to
the potential strength of the OCA's production prospects, analysts say.
Chevron holds "a working interest in several blocks in the Thailand-Cambodia
Overlapping Claim Area", according to a notice on the company's website dated
May this year. "As of early 2008, these areas were inactive pending resolution
of border issues between the two countries," the notice said.
The ultimate legal position of companies allocated blocks is unclear, with the
Thais making the majority of their awards under a royalty tax system in the
late 1970s and Cambodia its competing concessions under a production-sharing
system in the late 1990s.
Officials from both sides have met several times a year under the terms of the
2001 MOU. Under former Thai prime minister Thaksin Shinawatra, who was known to
have close ties with his counterpart Hun Sen, there were signs of a possible
breakthrough, but overall little or no progress was made.
Discussions broke off following a breakdown in Thai-Cambodian diplomatic
relations in early 2003 after mobs, angered by reports that a Thai actress said
Cambodia's revered Angkor Wat temple should be part of Thailand, attacked the
Thai embassy and Thai-owned businesses in Phnom Penh.
Bilateral relations were eventually repaired and negotiations resumed, but the
September 2006 military coup in Thailand cast a new cloud of uncertainty over
the talks. The energy minister in the successor Thai interim government did
acknowledge the importance of finding a way to overcome the impasse.
Prospects of resolving the temple clash may have improved with the appointment
last week of a retired career diplomat, Tej Bunnag, as Thailand's foreign
minister following the resignation of Noppadon Pattama, forced to quit over his
handling of the Preah Vihear issue. Noppadon was a former lawyer for Thaksin.
On Monday, Tej led Thai negotiators at a meeting with their Cambodian
counterparts at Siem Reap, near Angkor Wat.
Considering that each country's Foreign rather than Energy Ministry is mainly
responsible for the OCA negotiations, nationalistic notions of prestige and
sovereignty have taken precedence over economic imperatives. That will continue
to be the case as long as the Preah Vihear temple controversy is unresolved -
to both countries' growing economic detriment.
Andrew Symon is a Singapore-based writer and analyst specializing in
energy and resources. He may be reached at andrew.symon@yahoo.com.sg
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