Cambodia's oil export ambitions sink with "stolen" tanker standoff

KrisEnergy

27/08/2021 11:04

By Prak Chan Thul and Aradhana Aravindan
    PHNOM PENH/SINGAPORE, Aug 27 (Reuters) - When Cambodian
officials commemorated the start of the country's first oil
project in June by preserving the first drops of production at a
high profile ceremony, they heralded the country's emergence as
a budding oil exporter at the heart of Asia. 
    But instead of reaping royalties, Cambodia's government has
filed a theft complaint against the crew of the tanker that
stored the crude, after they sailed away with the oil amid a
payment dispute with the oil field's developer.  urn:newsml:reuters.com:*:nL1N2PX055
    Singapore-based KrisEnergy, which owns a 95% stake in the
offshore Apsara field in the Gulf of Thailand, was forced into
liquidation shortly after production began in December 2020.
Cost overruns and poor oil yields from the project had left the
company unable to repay debt.  urn:newsml:reuters.com:*:nL2N2NS1L2
    KrisEnergy's collapse also ended hopes of further oil sale
proceeds for the Cambodian government, which owns the remaining
5% stake. All operations were halted and are deemed unlikely to
resume given poor extraction rates, according to a local media
report citing the Cambodian Ministry of Mines and Energy in
July.  urn:newsml:reuters.com:*:nL1N2JA08F
    That's likely to be a major disappointment to Cambodian
authorities, who had anticipated roughly $500 million in tax and
royalty revenues over the project's lifetime. 
    The output stoppage means all there is left to show for
Cambodia's oil production efforts now lies in the belly of the
MT Strovolos, the 300,000-barrel tanker that had stored the oil
produced at the site until it was forced to divert last month in
search of a fresh crew and has now been detained by the
Indonesian navy.
    The Cambodian energy ministry, KrisEnergy and its
liquidators did not respond to requests for comment.
    
    LEGAL DEADLOCK
    With the fully-laden vessel now impounded in Batam, and
KrisEnergy's liquidation proceedings still under way, lawyers
who have been tracking developments predict a lengthy dispute
over who owns and can sell the oil.
    "I expect that if the Cambodian Government wants to detain
the cargo and have it shipped back to Cambodia, there may arise
competing claimants who are saying they are lawful owners of the
cargo, potentially including the liquidator of KrisEnergy," said
Peter Doraisamy, managing partner at PDLegal LLC.
    "It is likely to take several years at the very minimum
depending on which jurisdiction is seized of the case, and there
is possibility that cases may be brought in more than one
jurisdiction and by different parties." 
    A key fundamental question is who actually owns the crude
cargo, currently valued at around $20 million, now that
KrisEnergy has become insolvent. 
    "The ship owner may not actually know who owns the cargo,
and he's not a party to any of those contracts, he just gets
told what to do by the charterer," said Leon Alexander, partner
at Clyde & Co.
    "But the shipowner owes a legal obligation to that person
who is the cargo owner, he's got to look after and care for the
cargo. And he's not allowed to deliver the cargo to the wrong
person or act in a manner inconsistent with the rights of the
cargo owner, or he faces a legal claim in conversion."
    Indonesian authorities have taken steps to secure the vessel
and its contents for investigation, Laode Muhamad, a spokesman
for the Indonesian Navy told Reuters.
    "Based on the provisions of the shipping law, the ship and
its documents and cargo are evidence for which approval for
confiscation is requested for investigation purposes,” he said.

    DIM FUTURE
    While legal manoeuvring around the cargo is just getting
under way, oil analysts say production at the field will likely
remain stopped, even with the recovery in oil prices and demand
this year.
    "The poor publicity surrounding Apsara leaves the government
with a Herculean task trying to attract other players into the
Cambodian hydrocarbon sector," said Rystad analyst Readul Islam.
    "I suspect that the shadow of Apsara will hang over
Cambodia’s hydrocarbon attempts for some time."
    

 (Additional reporting by Florence Tan in Singapore, and
Agustinus Beo Da Costa in Jakarta; Editing by Gavin Maguire and
Kim Coghill)
 ((Florence.Tan@thomsonreuters.com; Reuters Messaging:
florence.tan.thomsonreuters.com@reuters.net))