Cambodia: The Enduring Energy Hub of Southeast Asia



INSIGHT




1. Exploiting hydrocarbon resources in Cambodia


Cambodia can benefit from the use of both domestic hydropower resources and those of neighboring countries. Other countries around Cambodia are building new hydropower plants. Hydropower is one of the best ways to generate consistently available electricity throughout the year, and to do so cheaply and efficiently.

Hydropower is also relatively environmentally friendly compared to other energy sources and, if CAPEX and OPEX are properly assessed before the hydropower plant is built, can significantly reduce electricity prices. However, hydropower also requires maintenance of infrastructure, dams and civil engineering. Earthworks, excavation, and stabilization measures increase costs. The water held back by the dam puts a lot of pressure on the plant. Over time, this will slowly but surely affect the structural integrity of the facility. Retrofits will have to be made. This means that additional costs will be incurred over time. This can be a significant portion of the cost of the facility. As the facility ages, the entire structure will need maintenance. Earthwork becomes more important as sediment and silt accumulate and are retained by the dam.

But overall, hydropower is still one of the most reliable ways to generate renewable energy. Hydropower will help Cambodia meet its energy needs without relying too much on imported energy.  

From a geological perspective, the further south you go in Southeast Asia, the closer you get to hydrocarbon-rich sections of the earth. The process by which hydrocarbons were formed in this region is quite similar to the way hydrocarbons accumulated in the Middle East. The island chains and the area south of Vietnam, Cambodia, and Thailand were shallow seas and much of the land that could contain hydrocarbon resources is now underwater and has been since the last ice age. Hydrocarbon resources may be found near coastal waters in southern Cambodia. Oil production could increase if these resources prove to be technically recoverable.

The real question is whether it is even necessary for Cambodia to exploit these resources. After all, Cambodia is in relative proximity to the Strait of Malacca. Cambodia has relatively easy access to the world’s major energy highway, and it might even be cheaper to simply import hydrocarbons from abroad through the Strait of Malacca. Oil prices remain subdued and fell significantly in Q1 2020, making it less attractive for oil companies to invest in new projects in an area where it is still uncertain whether the venture will pay off. Cambodia has continuously available oil and gas reserves that serve as baseload to maintain power load on the grid. We have not considered the potential of lignite, hard coal and nuclear energy at this point.


2. Solar energy has great prospects in Cambodia. Most of the private solar potential probably remains unused.

Solar energy has great prospects in Cambodia and in Southeast Asia in general. Solar energy is obvious for Cambodia because the country is located near the equator. The further south you go, the more solar radiation increases. Also, solar energy can be used almost all year round in countries that are further south, which is an added advantage.

We can compare this with countries that are much further north, like Germany. Germany also has the disadvantage of being very cloudy, especially in winter. Seasonal fluctuations in solar radiation make the use of solar energy in northern Europe even less attractive. Cambodia has none of these disadvantages. Solar energy should make a significant contribution to energy diversification, especially for rooftop installations.

Solar energy is best seen as an additional lever in Cambodia’s energy system in case other renewable energy sources are not available. For example, let’s imagine that there is a drought, which would mean that Cambodia needs to find alternative energy sources quickly. Or another alternative scenario is that energy trade through the Strait of Malacca is disrupted, which would mean that Cambodia would be cut off from much of its hydrocarbon imports. In this situation, the population would have to rely on its own energy supply. The beauty of this is that it works well in both urban and rural areas.


3. There is great potential for biomass in Cambodia.


Furthermore, biomass should have great potential in Cambodia. This is due in part to the heavy rainfall during the monsoon season and Cambodia’s equatorial latitude. Freshwater resources are significant, which should allow not only aquaculture but also algae production. Algal fuel production can make a massive contribution to Cambodia’s energy supply.

The combination of water resources and equatorial latitude makes Cambodia potentially one of the best regions in the world to pursue this path. Of course, one would have to compare the potential of algal biofuels with the potential for hydrocarbons. Most likely, hydrocarbon energy resources offer a higher EROI (energy-return-on-energy-invested), but they are non-renewable compared to algae biofuels. This should serve as an additional measure of energy diversification.

At this point, we have not even considered Cambodia’s potential for biomass and biogas production to decentralize the energy system and provide energy to rural communities.


4. Cambodia’s far-reaching potential to increase international cooperation within Southeast Asia.


Cambodia has a relatively good chance of cooperating with its neighbors on energy issues. Such cooperation can be extended to Thailand and Malaysia as well as to Singapore. At the international level, there is great potential to develop new areas of cooperation. This may include deeper involvement with Vietnam in the area of electricity trade. This can help Cambodia further diversify its energy sector.

Thailand, Cambodia and Vietnam should have a very good chance to become industrial hubs and serve the Chinese, Indian and Southeast Asian markets. The high demand for energy imports should further promote energy cooperation throughout the Southeast Asian region. Cambodia is the center of this entire region both economically and in terms of energy supply.

We should also remember that there have been great empires in Thailand and Cambodia throughout history. That is, there are historical antecedents that underscore the importance of this region in global trade. This could indicate a reversal of fortune as this region is about to become a pole of the global economy once again.

Cambodia has also joined RCEP and is part of ASEAN. This will have a significant impact on energy trade in this region. It means that Cambodia will be more integrated into this region and will benefit from regional trade relations. This will further manifest itself in energy developments in Cambodia and may lead to an increase in foreign investment in Cambodia. In addition, Cambodia will likely benefit from increased cooperation with China, which has become the energy hub of East and Southeast Asia


Many thanks for the shared interest in the energy world!



This article is just meant to inform the reader of recent developments in the energy industry at large and to share knowledge and insights with a wider audience. The author does not put forth investment recommendations. This article should not be taken as investment advice and the author cannot be held to account for investments made. For more information, please refer to the Legal Disclosure and Privacy Policy, which you can click on or find at the top of this page in the menu bar. 

Email:

support@boegelsackenergy.com