Together we gain

Pheu Thai election win raises hopes for agreement on overlapping petroleum claims, which were almost resolved before the 2006 coup that toppled Thaksin Shinawatra. The result could be huge economic benefits for Cambodia

Published: 25/07/2011
Newspaper section: Business

Bangkok Post

PHNOM PENH : Diplomatic cables from the American embassy in Phnom Penh released last week by the anti-secrecy organisation WikiLeaks show that Cambodian officials believed they were just months from reaching a deal with Thailand over the overlapping claims area in the Gulf of Thailand when Thaksin Shinawatra was ousted in a coup in 2006.

The revelations, combined with the victory of the Thaksin-backed Puea Thai party in the July 3 election, suggest that the new government may be positioned to resolve the long-running dispute over the overlapping claims area, which spans roughly 27,000 square kilometres and is thought to contain significant oil and gas reserves.

Cambodia and Thailand signed a memorandum of understanding in 2001 on joint development of the southern portion of the disputed area, with the northern portion to be divided by a defined maritime border. Bangkok cancelled this agreement in 2009, however, in protest over Mr Thaksin's appointment as an economic adviser to the Cambodian government.

The overlapping claims area is thought to contain up to 11 trillion cubic feet of natural gas, according to the market intelligence firm CLC Asia, along with unknown quantities of oil.

Revenues from the area could "revolutionise" impoverished Cambodia, Gerry Flaherty, Chevron's general manager for exploration, is quoted as saying in a February 2008 cable from the US embassy in Phnom Penh.

Thailand also stands to derive significant financial benefits in addition to easing its dependence on Burmese gas supplies and oil imports that have helped drive headline inflation.

Both sides have granted overlapping exploration rights to the area in past years to firms including Total, ConocoPhillips, BHP Billiton, Chevron and Japan's Idemitsu.

Initial momentum from the signing of the 2001 MoU was blocked by the 2003 anti-Thai riots in Phnom Penh that saw the Thai Embassy burned down and diplomatic relations frayed.

Talks in later years stalled over differing plans for revenue sharing. Cambodia called for the overlapping claims area to be divided in checkerboard fashion, creating 14 blocks in which revenues and management responsibilities would be shared equally.

Thailand countered by suggesting that the overlapping claims area be divided into thirds, with revenues from the western third split 80-20 in favour of Thailand, the middle third split 50-50, and the eastern third split 80-20 for Cambodia. Analysts say the differing schemes are motivated by the fact that deposits in the western portion of the overlapping claims area, which extends into the Pattani Basin, are thought to be the most easily exploitable.

Development of the area has been stalled pending a resolution to this disagreement, but a 2007 cable from the US embassy in Phnom Penh suggests that such an accord was at one point reachable. Recounting a meeting between embassy staff, Cambodian officials and visiting ConocoPhillips representatives, the cable cites Cambodian foreign ministry secretary of state Kao Kim Hourn as saying that the two sides "had come very close to settling the dispute

[over the overlapping claims area] just prior to the fall of the Thaksin government in Thailand".

Kao Kim Hourn reportedly said the agreed formula for dividing the revenues was along the lines of what Thailand had proposed: a 50-50 split in the middle block and 80-20 in the eastern and western blocks.

"[Kao Kim Hourn] thought that an additional six months of negotiations would have settled the matter," the cable states.

"However, in Thailand's current disarray, he said, there could be no resolution until after Thailand's elections and the formation of a new government. Other interlocutors, including [Cambodian Commerce Minister] Cham Prasidh and [Finance Minister] Keat Chhon, agreed that nothing could be accomplished until a new government was formed in Thailand."

Admittedly, the short-lived, Thaksin-aligned governments of Samak Sundaravej and Somchai Wongsawat apparently made little progress in resolving the issue as sovereignty tensions between the two sides flared in 2008 over the inscription of Preah Vihear temple as a Unesco World Heritage site for Cambodia.

A May 2008 cable recounting a meeting with Cambodian Prime Minister Hun Sen says the premier wanted to consider the overlapping claims area dispute "separately from the contentious Preah Vihear question". However, he went on to voice support for the old, checkerboard-style proposal for revenue sharing, rather than the Thai-backed proposal that Kao Kim Hourn had outlined.

"It seems likely that _ despite Thai and Cambodian statements to the contrary _ the inscription of the temple is linked to resolving the maritime claims dispute, at least in the minds of senior Thai and Cambodian government leaders," the cable concludes. "Both sides are looking at the issues from political, cultural, and economic perspectives."

While the disputed border near Preah Vihear remains a vexing question, it is clearly in the interests of both sides to resolve their maritime boundary dispute; Chevron's Gerry Flaherty called the overlapping claims area "one of the best areas for exploration in the world", according to the February 2008 cable.

With Puea Thai set to take power, the Cambodian side, at least, seems keen to return to the negotiating table. Cambodian Council of Ministers spokesman Phay Siphan, speaking of the overlapping claims area dispute, told the Bangkok Post following the election that Phnom Penh wants to "work on that with the incoming government".

"We'd love to see [an agreement on] the overlapping area in the sea implemented so that we can figure out how to share it," he said.

"We still consider that the cooperation in the economy or trade sector is most important, and both countries need it," he added.