Oil industry to confront certain challenges

According to a top official of the Ministry of Mines and Energy, Cambodia's oil operations in the offshore Block A area will face some challenges, as KrisEnergy (Cambodia) Co Ltd loses funding following its parent company in Singapore, KrisEnergy Ltd, which file for liquidation and arrange for sales of assets to pay off their debt.

KrisEnergy announced on 4 June it cannot repay debts exceeding the value of its assets, noting the restructuring of cash flows from Apsara's development of the Apsara Mini Phase 1A oilfield He said via Facebook: “After the court proceedings, KrisEnergy will be liquidated and the creditors will be able to manage all of KrisEnergy’s existing assets, including its subsidiary KrisEnergy Cambodia and the petroleum concession in Block A in Cambodia.

The CEO of the KrisEnergy Cambodia subsidiary will then have to discuss with the Cambodian government how to implement Block A Petroleum Block, where creditors can continue to manage or seek partners to restructure the assets based on the Petroleum Agreeing and on Cambodial Law in the case of Petroleum Blocks.

He said in the meantime that the petroleum operations of Block A in Cambodia are being met with a hurdle in Cambodia in abeyance of a court action and negotiations between creditor parties to continue with the Cambodian administration.

“Major petroleum operations and planned follow-up development projects will be temporarily suspended pending a settlement agreement between the government and creditors, which has the right to proceed with the courts,” Saktheara said.

KrisEnergy investor relations and corporate communications vice-president Tanya Pang told The Post: “The winding-up petition as announced on June 4 relates only to KrisEnergy Ltd, the parent company listed on the Singapore Exchange and not the subsidiary companies holding the group’s assets. Operations of KrisEnergy’s assets are continuing.”

Cambodia extracted its first drop of crude oil on December 28 from the A-01D well – part of the five-well mini-platform featured in KrisEnergy’s “Mini-Phase 1A” development.

According to Saktheara, KrisEnergy holds interests in licences in countries such as Bangladesh, Indonesia, Thailand, Vietnam and most recently in Cambodia, through its subsidiary KrisEnergy Cambodia.

He said KrisEnergy has been facing a financial crisis since 2018 and has started selling oil block concessions in some countries to overcome it. But the predicament had worsened by 2019, and the company was facing more stringent enforcement to collect debt from the creditors, he added.

The company first filed for a debt moratorium “in early 2019”, seeking protection from a Singapore court to avoid filing for bankruptcy and liquidation, according to Saktheara.

After receiving support from the Royal Government of Cambodia, KrisEnergy continued to develop the oil wells and proposed a downsizing of the plan – from 20 wells to just five, he said.

He said the company expects the oil production projects in Cambodia’s Block A to build confidence with major creditors, compelling them to examine the possibility of turning the debt into venture capital firms.

However, after the production of Cambodia’s first drop of oil at the end of 2020, production volumes from the test well did not meet the company’s expectations, he added.

“These factors caused the company to run out of options and have to apply to the court to declare the sale of all the company’s assets to repay the debt,” Saktheara said. KrisEnergy is currently operating five test wells in a 110sq km production area of Block A, which covers about 3,000sq km, he said.