Thailand and Cambodia are edging closer to rekindling negotiations over the long-contested, and presumably lucrative, Overlapping Claims Area (OCA) in the Gulf of Thailand.

State-owned media, Agence Kampuchea Presse (AKP), yesterday reported that the Cambodian government had established a committee charged with negotiating the development of oil resources in the OCA with the Thai government.

Deputy Prime Minister Sok An and Var Kim Hong, senior minister in charge of border affairs, will chair the committee, according to AKP. Minister of Mines and Energy Suy Sem will claim the position as vice chairman.

“The committee is commissioned to negotiate, prepare for treaties and other legal documents related to the common development of oil resources in the maritime overlapping claims area between the two neighboring countries, to maritime border demarcation, and so on,” the AKP report said.

Development rights to the 26,000-square-kilometre OCA, which overlaps the Cambodian and Thai borders in the Gulf of Thailand, has been a point of contention between the two neighbouring nations, who both laid claim to the area in the early 1970s.

A memorandum of understanding to jointly explore the area was signed in 2001, but was later shelved by the Thai government in 2009. Talks over the joint effort to explore the region re-emerged when Yingluck Shinawatra, known for having close relations with Cambodian Prime Minister Hun Sen, took office in 2011.

Since Shinawatra’s government was ousted in May, both nations’ leaders have sought to rekindle talks over the OCA.

But while both sides have something to gain from the joint-exploration negotiations over the OCA, which is estimated to hold up to 500 million barrels of oil and gas deposits under the seafloor, Cambodia’s inexperience and lack of regulatory infrastructure in extractive industries could dampen the potential benefits.

“Both sides, Cambodia and Thailand, seem to have a commitment to work on this issue and the committee is a good step to move forward,” Meng Saktheara, secretary of state at Cambodia’s Ministry of Mines and Energy, said, adding that no seismic or exploratory studies have yet been commission from either nation on the area.

“From my personal perspective, there are many challenges for Cambodia to overcome before we see a solution. We are a young country, we lack legal frameworks, human resources and the industry itself.”

“Thailand, meanwhile, has the demand, the infrastructure and the technical expertise in gas and power generation. So, if the solution is reached and the area is developed, Cambodia will have to find a way

to promote investment into the country so we can absorb fully the benefits of the OCA,” Saktheara said.

“Otherwise all the benefits could go to Thailand.”

Oil and gas firms have long awaited a resolution over the OCA due to its location at the northeastern end of Thailand’s 300-kilometre-long Pattani Basin, which has been actively explored since the late 1960s for both oil and gas.

“This is very prospective and could host similar resources to those to the west which are keenly sought,” Richard Stanger, president of the Cambodia Association for Mining and Exploration Companies (CAMEC), said yesterday.

“It’s important that this is resolved to the advantage of Cambodia – rather than quickly.”

Stanger said that negotiations over ownership of the OCA could follow one of two methods; either by simply following the onshore international boundary lines between Cambodia and Thailand, or by a boundary determined by a direct right angle to the coastline.

“The latter is reasonable and fair – the former is not and would be to the great disadvantage of Cambodia,” Stanger said.

“The area we are talking about is 26,100 square kilometres and this could easily contain 100-500 million barrels of oil equivalent, which would have a very positive impact on the country.”

The pressure is on for Thailand to seek new and productive natural gas resources, according to the International Energy Agency (IEA).

In the IEA’s September 2013 Southeast Asia Energy Outlook, the agency said by 2035, Thailand’s gas production is expected to decline by 75 per cent while domestic demand for natural gas is expected to rise during that period.

The IEA cited the resolution of Cambodia and Thailand’s long-standing dispute over the OCA as a promising, yet long-term, benefit to Thailand’s energy outlook to 2035.

“At a high level, if any gas is discovered in the OCA, developing it will likely benefit both Cambodia and Thailand. For Thailand, output from the large fields in the gulf of Thailand will decline over the next decade and output from the OCA area could help mitigate this at a cheaper cost than importing LNG,” Prasanth Kakaraparthi, Wood Mackenzie’s South Eastern Asia LNG analyst said in an email yesterday.

“For Cambodia, the gas could potentially kick start a domestic industry and the revenues from the sale of oil and gas will bolster government budgets.”