Electrifying the country

Cambodia's infrastructure, which was almost completely destroyed after more than 20 years of warfare, civil strife and neglect, is slowly being restored. Cambodia's public utilities are unreliable, expensive, and cover only the major cities. There is tremendous demand in Cambodia for diesel generators for use as back up power, on-site industrial power plants, and power generation in rural areas not served by public utilities. Natural gas is not currently economical in Cambodia.

Electricity grid exists, and only 12% of the total population has access to electricity, with only about 7 percent of the rural population having access to a reliable electricity supply. Another 45 percent has less dependable battery-powered electricity.

In Cambodia, electricity is generated in 22 isolated systems, mostly from diesel generators. In 2000, the total installed capacity of electricity generation in Cambodia was 145 MW. As a result of the small size of generation units (300 kW to 5 MW unit size), dependence on oil-based generation, and large distribution losses, the unit cost of electricity in Cambodia is among the highest in the region. Electricity sales increased from 311,508 MWH in 1999 to 355,790 MWH in 2000. Demand for power in Cambodia as estimated at 125 MW in 1998 and is expected to increase to 800 MW by 2016.

The minister's inviting message is clear "In the power sector we would like to invite investors to come develop our hydropower resources. This is a very good opportunity, once we have linked our network with the neighboring countries, we can even sell the excess of power to them. The GMS countries have signed the Inter-governmental Agreement for Power Trade. H.E. Ith Praing, Secretary of State at the Ministry of Industry, Energy and Mines, concludes.
Cambodia is currently buying electricity for Poipet town from Anco, an international engineering and energy company that possess a transformer just across the border in Sa Kaeo, Thailand. The project cost $3 million, and also plans to supply Siem Reap and Battambang in projects that cost upward of $13 million. Thai company EGCO announced in 2001 that it would also bid on selling electricity to these same Cambodian towns beginning in 2003. Early last year, National Thai Electricity Company EGAT finalized a Contract to supply 30MW of electricity to western Cambodia.
Similarly, Cambodia signed agreements in 1999 and 2000 to buy electricity from Vietnam, a five-year, $20 million venture that was supposed to begin in 2001 with partial funding from the World Bank. To supply the energy, Vietnam was to build a series of transformers and power lines the stretched from Can Tho in the Mekong Delta west into Takeo, Cambodia. However, the project has yet to be completed.
Other cooperation with Vietnam are: (i) the importation of power to supply communities close to the border in the provinces of Svay Rieng, Takeo, Prey Veng, Kandal and Kampot and (ii) a Feasibility Study on the Interconnection between the two national grids at high voltage.

The power sector strategy

The Royal Government of Cambodia formulated policy to provide adequate energy throughout Cambodia at reasonable and affordable price and is determined to take accelerated action and initiative in making available the energy to the disadvantaged group of population. In order to achieve these objectives the Royal Government has developed a long-term (1999-2016) Power Sector Strategy. According to Dr. Ty Norin, Chairman of the recently created Electricity Authority of Cambodia (EAC) (www.eac.gov.kh), "The main problem in Cambodia is the cost of power generation, (…) we are concentrating our efforts into helping to bring down the generation costs in order to achieve lower electricity costs. (…) we will interconnect the system, then we will increase the amount of users and finally we will propose investment possibilities".

With regard to electricity generation planning, the government envisions the establishment of a gas power plant in Sihanoukville and hydropower projects located in the western portion of Cambodia. The government also plans to develop a national grid linking the larger generating units to population centres, starting initially in the southern portion of the country (Phnom Penh to the Vietnam border, Takeo, Kampot and Sihanoukville), and later expanding to the northern region, including Banteay Mean Chay, Siem Reap and Battambang. The government has also initiated a rural electrification program that includes the development of renewable energy sources.

Energy Development Plan

As concerns the Rural Electrification Strategy the Minister of Industry, Energy and Mines precises that " The electricity development program includes grid extension to the areas that are close to an existing grid and the development of stand-alone systems with diesel generators for villages and small communities and the development of renewable energy sources with projects like the micro-hydro in the northeastern or western part of the country, and the solar power energy".

The minister also explains how the creation of the Rural Electrification Fund (REF) will "subsidize one part of the rural electrification investment; the other sources of financing are:

1) longer term loan from local commercial bank designated by the World Bank and (2) self equity".

Plans for Cambodia's first independent power production project, scheduled to provide another 60 megawatts of electrical power to the city, are nearing completion.
According to the Cambodia Power Sector Strategy (1999-2016) developed by the Ministry of Industry, Mines, and Energy (MIME), annual electricity demand in Cambodia is projected to rise from 522GWh in 1998 to 2,634 GWh in 2016. To meet this demand, the government plans to develop $1 billion worth of hydro, gas turbine thermal, and combined cycle base load thermal generating plants in Phnom Penh, Sihanoukville, Battambang, and other cities from 2000 to 2010. The Cambodian government also plans to build a nation-wide transmission system during the same period.

Though Power supply to the city of Phnom Penh has improved dramatically since 1993, and approximately 50 megawatts of power were added to serve the city during 1995 and 1996, the gap between the needs and the energy supplied remains .The Master Plan proposed that to satisfy demand in Phnom Penh and these densely populated parts of Cambodia, a major part of the capacity required be established in Sihanoukville and capacity for peak demand be established in Phnom Penh. It also proposed that up to 30% (80MW) of demand be met through Power Trade with Vietnam.

Power Sector Investment Plan

Indeed The implementation of the Power Sector Strategy will be a very major undertaking for Cambodia. It is estimated that total investment requirements over the period 1999-2016 would total USD1.2 to us$1.5 billion. For the first 5 years of the Program (1999-2003), the investment required is USD400 million, which represents over 10% of total domestic investment and nearly 3% of GDP. Concessional finance together with private sector investment will need to be mobilized.

The Investment Plan comprises (i) the development of a National Generation and Transmission Grid; (ii) a Provincial Supplies Rehabilitation Program; and (iii) a Rural Electrification Strategy and Implementation Plan.

Private Sector Participation in the Electric Sector Development

The Government wishes to encourage private sector participation in the development of the electricity sector. A means of achieving this in rural areas has already been discussed above.

In relation to private sector companies' participation in providing power to supply the National Grid, Phnom Penh and provincial towns, a policy is to be developed to encourage private sector supply of power at competitive prices. A World Bank sponsored grant is used to develop guidelines on private sector participation. It will include guidelines for competitive tendering by private sector power producers to supply EDC. As in other countries, a Model Power Purchase Agreement will be used for competitive tendering. Policies will also clearly identify the taxation and investment incentives that are available for investment in the power sector.

Major Players in Independent Power Production

There are a number of proposed power plants in Cambodia accounting for hundreds of millions. They include 320MW and 180MW plants by Siemens AG, a 12MW plant by Chinese company CETIC, a 180MW project by Japanese company JICA, and a 60MW plant by the US company Beacon Hill. Among those completed and operational are:

Kirirom I

This is the first contract on a BOT basis realized by the Chinese company CETIC , in Cambodia. As his General Manager, Mr. Xiaoming Ou, explains: "Kirirom I comprises one power plant with two 6 MW turbine units, and the dam which has been rebuilt. (…) a transmission line of 115 Kv. with a length of 120 Km to connect Kirirom with Phnom Penh". Although it was the first time the company found itself engaged in such project, the experience has been quite positive and plans are on their way to start a second project, Kirirom III, as Mr. Xiaoming Ou said: "We have formally expressed our desire to the MIME (Ministry of Industry, Mines & Energy) to build Kirirom III on a BOT basis. We are scheduled to start in July or August this year". This is a slightly bigger project 30 Km. away from Kirirom I, with an 18 MW hydropower plant. If this project works out as expected, the Chinese company will most likely start into even bigger projects in a country that is extremely rich in water resources.

Oil and gas sector in Cambodia : "exploring to fuel the economy"

Cambodia's natural resources, in particular, the oil and gas sector has remained largely untapped due to falling prices, internal conflicts and territorial disputes with neighbouring Thailand. For H.E. Sok An, Minister in charge of the council of Ministers " The CNPA sees the discovery and processing of oil and gas products within Cambodia as a vital step in accelerating the country's economic development". At present, petroleum products for domestic and industrial use are imported, at an ever-increasing rate and at great expense, from Singapore, Vietnam and Thailand

The total estimated reserves in terms of Gas and Oil plus condensates is about 15TCF (Trillion Cubic Feet) for the offshore and is located in different acreages. It is also said that the most viable and large reservoirs are in the disputed waters in the Gulf of Siam - the Overlapping Claims Areas and the inland reservoirs in the Tonle Sap region.

Along the Overlapping Claims Area, an area estimated to stretch some 27,000 square kilometers and an area said to be most viable for commercial exploitation of oil and gas is currently under negotiations with the Thai authorities for production sharing and joint exploration rights. Past exploratory wells drilled between late 1960s and 1974 when at least three wells were drilled with mixed results but said to be largely not commercially viable. It was only in 1987 that surveys suggested the existence of an offshore basin - the Khmer Trough, which bears strong resemblance to the prolific Patanni Trough and the Malay Basin Province. In 1994, exploration took off to a strong start with the drilling of four wells again with mixed results but left unexploited for commercial reasons and then again in 1998 when Woodside carried out seismic survey and a reassessment of all previous seismic data. Woodside relinquished their rights in 1999 and 2000 respectively and the oil and gas activities went silent again until 2002 when ChevronTexaco-MOECO signed a production sharing agreement with the Cambodian National Petroleum Authority in August 2002 and embarked on the drilling of two exploratory wells in January this year.

As the Director General of the CNPA, H.E. Te Duong Tara explains: "(…) the CNPA would be in charge of both aspects of the oil sector, upstream and downstream. With upstream we mean all activity starting from day one until you get production and downstream from wellhead down to the consumer. (…) we have been assigned a huge task, and in order to accomplish this task, we need investment and qualified human resources."

The CNPA is in the process of preparing an Energy Master Plan to develop the whole energy sector. The institution, has also drafted the Petroleum Act that should have to be approved at the end of this year. Concerning this Act, H.E. Te Duong Tara said: "(…) the new law is going to be very comprehensive. (…) I hope this new law will accommodate everyone as it will be more flexible and will give more incentive for the investor to come in. Unlike before, the market of oil and gas is open, so we have to be more competitive compared to the neighboring countries Vietnam and Thailand."

While the oil industry gets on its way, other companies have known how to establish itself in the country and provide the current needs by importing oil. Although several multinational and regional companies are present in the Cambodian market, the largest company is Sokimex Group. Sokimex ( started as a trading firm and has grown to a giant, the biggest company in Cambodia with almost 50% of the oil distribution and businesses in other areas like industry and tourism. As his Vice-Chairman, Oknha Sorn Sokna, explains: "Sokimex is indeed the first petroleum company of the country but it is also involved in several other businesses"

MINING SECTOR

Cambodia is known worldwide for its rubies, but there are more mineral resources in the Cambodian soils proven potential exists for: sapphires, alluvial, gold, alluvial cassiterite, silica, manganese, slate, peat, pagodite, phosphate, granite, limestone, sand, gravel, clay, bauxite, zinc and copper.

The legal environment for business in the mining sector is deficient. The Cabinet Council of Ministers discussed an update of the mining code in August 1995 but no details of possible changes are yet available. It is envisaged that the mining code will be complemented by a sub-decree on mining, which will provide a detailed legal framework governing the sector.
Government Mineral Exploration Policy: Companies are offered, during the 1st phase, two to six years to conduct exploration and a feasibility study in a designated area. MIME will assist with technical recommendations and the Cambodia Development Council (CDC) grants an exploration license to interested investors.
During the second phase, if exploration is successful, companies are required to present a master project plan. CDC grants a mining license to companies. Royalties and surface rentals are levied on mineral extraction. When production is profitable, companies are required to pay income taxes, in addition to royalties and surface rentals. MIME encourages two forms of contracts: a production sharing agreement with a low tax rate, or a concession with a high tax rate.