Oil and gas exploration companies operating in Cambodia must follow the schedule of their concession contracts or face fines and risk having their contracts revoked, a state official warned yesterday.

Despite low world oil prices, he said, the government wants to see progress toward developing the country’s untapped petroleum resources.

“We are flexible with companies seeing that the reason [for the slow pace of exploration] is that global oil prices are low so they cannot commence exploratory drilling right now, but we are not so soft that we’ll give them concessions and let them do nothing,” said Meng Saktheara, secretary of state at the Ministry of Mines and Energy.

He said companies that fail to explore their concessions would be penalised.

“First, inactive firms will be fined by taking their deposit fee, and second by taking back their exploration license,” he said.

Saktheara said most of the oil and gas exploration companies operating in Cambodia are inactive or have suspended their activities.

“They are reluctant to operate,” he said. “We want to push them to be more active because their license deadline is approaching and we don’t want them to delay.”

His warning came a day after the government agreed to allow Vietnamese state-owned PetroVietnam Exploration Production Corporation (PVEP) to postpone preliminary drilling on Block XV in Kampong Thom province for another year. The company was scheduled to commence exploratory drilling on its 6,900-square kilometre exploration block in January 2016, but will now have until January 2017 to do so.

Saktheara stressed that despite the government’s flexibility on the drilling schedule, it still expects PVEP to meet the required milestones of its exploration license, which is due to expire in 2018.

He said the company’s request for a three-year extension of its license would be denied, though his ministry would reconsider the request once it showed progress in exploring the block.

In January, Cambodia cancelled two offshore licenses of Malaysian operator Resourceful Petroleum Ltd, due to violations of the company’s concession agreement and failure to fulfill the obligations stated in the agreement.

The two licenses were for development and operations of offshore oil Block B and Block F, which cover 6,300 square kilometres and 7,000 square kilometres in the Gulf of Thailand, respectively.

Saktheara said several other exploration firms are also behind schedule in commencing preliminary drilling operations on their offshore oil and gas blocks. He cited sluggish progress in Block C, operated by Polytec Petroleum Hong Kong, and Block D, operated by CPHL (Cambodia) Co Ltd.

He said the government understands the difficulties that petroleum exploration companies are facing given that world oil prices are near 12-year lows, and while it will be flexible, it cannot allow these firms to sit on their licenses while remaining inactive.

He added that in the case of Block D, the operator also has a financial issue to resolve with the government.

“They haven’t complied with their financial obligation to the government,” Saktheara said. “Now we’re considering whether or not to forgive the company or end the agreement.”