Cambodia's coming energy bonanza

If the United Nations, World Bank and Harvard University are to be believed, Cambodia is poised to become a major new global energy exporter, with a fossil-fuel windfall that promises to double the country's current GDP and potentially lift millions of Cambodians out of poverty.

The World Bank has said that Cambodia's total energy reserves may be as high as 2 billion barrels of oil and 10 trillion cubic feet of natural gas. Depending on future world prices, fuel exports could generate annual revenues upwards of US$2 billion, or several times the current combined amount that Cambodia generates in domestic revenues and receives in foreign aid. Meanwhile, Cambodian energy officials indicated this week that they hope to ramp up production as early as 2009, three to seven years earlier than the World Bank projected as feasible.

An energy-rich Cambodia would appreciably enhance the war-torn country's geostrategic significance, particularly as the United States and China aggressively joust for access to new fuel sources around the globe.

Yet there's also a potential Cold War twist to China's bid. Any future oil-and-gas-production agreements with the CPP-led government will likely need to pass through Sokimex, Cambodia's leading conglomerate, which through a joint venture with Tela Petroleum Group controls 80% of the country's domestic oil and gas distribution. Energy analysts note that Cambodia's newfound reserves coincide with the expectation that Vietnam's own diminishing fuel supplies will run out over the next decade. So far Hanoi has no plans on how it might fill this future energy gap.

What is more likely is that senior CPP officials have designs on building up Sokimex and perhaps also Tela Petroleum through lucrative state energy concessions, which, once converted into foreign-currency earnings, may be tapped to support its patronage-based political machine and further consolidate the party's dominance over Cambodian politics - akin to how Malaysia's ruling United Malays National Organization has relied on state oil giant Petronas for its own political purposes.

Western donors have already sounded warnings about the potential pitfalls of Cambodia's supposed newfound energy wealth. Hun Sen's government has come under intense donor pressure to tackle endemic corruption among his ranks.