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The Southeast Asian oil and gas community is all abuzz
about the overlapping claims dispute between Thailand and Cambodia.
The overlapping claims area (OCA) extends more than 27,000 square kilometres
in the Gulf of Thailand and originates from a dispute concerning the rightful
border between the countries.
The reason for the intense regional interest in the OCA is that many oil and
gas experts believe the area within the OCA is the most attractive undeveloped oil
and gas exploration area in all of Asia.
OCA history: The dispute between Thailand and Cambodia over
the OCA dates back to 1907 and is based upon differing interpretations of a
treaty and maritime law put forth by the two countries. A memorandum of understanding
setting forth an agreed mutual framework for a settlement of the dispute was
signed by both sides in 2001, only to be cancelled by Thailand in 2009 for
political reasons.
In an effort to shore up their respective legal claims to the OCA, both countries
have already awarded their own individual conditional exploration and
production licences to various oil and gas companies to develop the areas
within the OCA. However, these companies are all required to wait to commence
exploration until after the dispute between the two countries has been
resolved.
Thailand divides the OCA into blocks 5-14 and has awarded conditional
licences for these blocks to Chevron, British Gas, Mitsui, Idemitsu and PTT
Exploration and Production.
Cambodia divides the OCA into areas 1-4 and has awarded conditional licences
for these areas to Idemitsu, ConocoPhillips and Total.
There has been little or no progress in recent years in finding a compromise
to this dispute, but since Thailand's new government was installed earlier this
year, there seems to have been a renewed political will to find a settlement on
both the Thailand and Cambodian sides, which has given rise to optimism.
Agreed negotiation framework: The following seems to be the
agreed-upon framework for settlement negotiations:
For Thailand's blocks 5 and 6 within the OCA (referred to by Cambodia as
area 1), the two countries have agreed to draw a median line at a place to be
agreed upon to be the new border between the two countries.
After the location of this median line is agreed upon, the conditional
licensees on both sides should then be free to explore and develop the areas on
their side of the boundary line.
Note that many believe blocks 5 and 6 to be less promising for oil and gas
than the rest of the OCA. However, fishing rights make this section very
important and complicate negotiations.
For Thailand's blocks 7-13 (referred to by the Cambodian government as areas
2-4), the two countries have agreed in principal to create a joint operating
zone similar to the joint development zone Thailand has previously negotiated
with Malaysia.
The expectation is that once a settlement is reached, each sides'
conditional licences will be required for joint development of their respective
blocks/areas, along with the conditional licensee named by the other side.
This negotiation is further complicated by the fact that both sides have
agreed all of the above related issues concerning the OCA must be resolved by
the countries at the same time.
Negotiating positions: Thailand's current negotiating
position seems to be that blocks 7-13 (the most promising for oil and gas)
should be divided into thirds with:
- the western third to be held 80% by Thailand and 20% by Cambodia;
- the middle third to be held by the two countries on a 50:50 basis; and
- the eastern third to be held 20% by Thailand and 80% by Cambodia.
Cambodia's position for the same areas/blocks seems to be that Thailand's
and Cambodia's interests for all of the areas/blocks should be divided equally.
So there is still a lot of work to do in the negotiations, and significant
obstacles remain, but there is strong optimism that a deal may be concluded
within the next two years.
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