Global fuel crisis adds urgency to Cambodian push to tap $300 billion energy resources

The oil shock from the Iran conflict has created renewed urgency for Cambodia to resolve a festering maritime dispute with Thailand and unlock undersea energy resources worth $300 billion, Cambodia's energy minister said on Wednesday.

Iran's grip on the Strait of Hormuz, the conduit for about a fifth of the global oil supply, has turned conflict there into the worst-ever global energy crisis.

Cambodia is relying on renewable energy sources including hydropower and a growing solar capacity to weather the current crisis, but its hopes for further industrialisation rest on more fossil fuel assets, Minister of Mines and Energy Keo Rottanak told Reuters in an interview.

"Before the crisis, perhaps all nations could take energy security a bit more lightly," he said. "But the ongoing crisis, especially the pressure from the Strait of Hormuz, has only brought energy security of any nation into sharper focus."

Cambodia has been in a boundary dispute for decades with its larger neighbour Thailand, discord that sparked two bouts of fighting last year that killed close to 150 people before the latest ceasefire in December.

An area of around 27,000 square km (10,400 square miles) in the Gulf of Thailand that is claimed by both countries is estimated to hold around 11 trillion cubic feet of natural gas, alongside large quantities of oil.

International oil and gas majors, including TotalEnergies TTEF.PA, are keen on potentially starting offshore exploration activities if the neighbours can resolve their disagreements over a patch of sea in the Gulf of Thailand, he said, adding that harnessing the oil and gas resources would be a win-win for Thailand and Cambodia.

UN CONCILIATION PROCESS NEXT STEP

Despite protests from Cambodia, the Thai government this month unilaterally terminated a 25-year-old agreement to work towards joint offshore energy exploration, arguing the framework had made no progress.

Thailand's move has meant that Cambodia will now have to rely on a compulsory conciliation process under the United Nations Convention on the Law of the Sea (UNCLOS) to reach an agreement on the maritime boundary, Keo Rottanak said.

"We see that our choice of the UNCLOS Compulsory Conciliation...is the only possible avenue to sort out differences in a peaceful and amicable manner," he said, adding that the Cambodian government plans to reach out to the Thai side for discussions on this mechanism.

Thailand's foreign ministry did not immediately respond to questions from Reuters.

Under the procedure, a panel of conciliators assists countries in settling their disputes, a process first utilised by Timor-Leste in 2016 to agree on permanent maritime boundaries with Australia.

LONG ROAD AHEAD

Given the years needed for exploration and development, a swift resolution to the border quarrel was crucial, he said.

"If you are going to wait for decades more, the chances of attracting financing to do oil and gas exploration and exploitation may not be there," he said. "And large firms are aware of that."

TotalEnergies did not immediately respond to a request for comment.

Following years of delay, Cambodia extracted its first crude oil from fields in the Gulf of Thailand in late 2020, in a venture between the government and KrisEnergy.

Only months later, however, the Singapore-listed firm announced it was headed for liquidation, casting a shadow over a sector that the Cambodian government is eager to resuscitate.

"Even if the two parties were to solve everything today, it will take time to ramp up financial resources and technology to do this," Keo Rottanak said, referring to Cambodia and Thailand.

-Reporting by Devjyot Ghoshal; Editing by Gus Trompiz/Keith Weir/Reuters