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Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges

A Report by La’o Hamutuk
Timor-Leste Institute for Reconstruction Monitoring and Analysis

February 2008.  More links added October 2012.

Appendix 2. History of Sunrise developments

Link to Index and Table of Contents

The history of Greater Sunrise, and the dispute over who owns it, goes back more than thirty years. This chronology lists the major events, but does not try to explain the context or more details. More information is available on La’o Hamutuk’s OilWeb CD-ROM and website (http://www.laohamutuk.org/Oil/OilIndex.html).

1970-1998
 

1970-1973

Australia and Indonesia begin negotiations on seabed boundaries, ignoring Portuguese objections that the seabed should be demarcated halfway between the coasts of Timor and Australia. Australia and Indonesia sign treaties “Establishing Certain Seabed Boundaries” on 18 May 1971 and 9 October 1972, which come into effect in November 1973. These treaties are based on the continental shelf principle, which is biased in favor of Australia. Because Portugal did not participate, the other two countries could not complete the line between Portuguese Timor and Australia, creating the “Timor Gap.” See Figure 1.

1974

Troubadour and Sunrise oil and gas fields discovered, collectively called Greater Sunrise. Woodside drills a test well Troubadour-1, with additional wells at Sunrise in 1975. See Figure 28 below.

7 December 1975

Indonesia invades Portuguese Timor (Timor-Leste).

1979

Australia accords legal de jure recognition to Indonesia’s annexation so it can negotiate with Jakarta about a maritime boundary to close the Timor Gap. Over the next ten years, Australia and Indonesia hold more than a dozen negotiating rounds. Although the countries cannot agree on a seabed boundary, they eventually reach an arrangement to share oil revenues.

11 December 1989

Australia and Indonesia sign the Timor Gap Treaty. The treaty establishes a Zone of Cooperation (ZOC) between Timor-Leste and Australia (later called the JPDA), north of the median line. It provides for Indonesia-Australia joint exploration of the illegally occupied territory, with revenues shared 50/50. The treaty is ratified and takes effect on 9 February 1991.
 

Figure 27. Foreign ministers Gareth Evans and Ali Alatas toast the signing of the Timor Gap Treaty while flying over the Timor Sea.

11 December 1991

Australia and Indonesia award production sharing contracts to Phillips Petroleum (which later became ConocoPhillips), Royal Dutch Shell, Woodside Australian Energy (later called Woodside Petroleum) and other companies to explore and exploit resources in the Timor Gap Zone of Cooperation.

1995-1996

Australia and Indonesia issue Production Sharing Contracts 95-19 and 96-20 for the part of Greater Sunrise inside the Zone of Cooperation (JPDA) to the Northern Australia Gas Venture (Woodside and Shell). Australia also issues contracts NT/P55 and NT/RL2 for the portion of Greater Sunrise east of the JPDA.

August 1995

Sunrise appraisal well drilled at Loxton Shoals, with a total of seven wells drilled by 1998.
1999-2001
 

30 August 1999

Timor-Leste’s people vote overwhelmingly to reject integration with Indonesia.

10 February 2000

Australia and UNTAET sign an interim Memorandum of Understanding, to continue the 1989 Australia-Indonesia Timor Gap Treaty terms but replace Indonesia with Timor-Leste. These agreements specify a 50/50 division between Australia and Timor-Leste of oil and gas production from the Joint Petroleum Development Area (called the Zone of Cooperation under the Timor Gap Treaty).

July-Sept. 2000

Woodside, Shell and partners undertake an extensive 3D seismic exploration of Greater Sunrise.

October 2000

UNTAET begins negotiations with Australia for a longer-duration agreement over division of Timor Sea resources, but not about maritime boundaries or the EEZ. In April 2001 Australia reiterates that it will not discuss formal maritime boundaries in the Timor Sea.

5 July 2001

UNTAET and Mari Alkatiri sign the Timor Sea Arrangement with Australia. Under this Arrangement, which replaces the February 2000 MOU, Timor-Leste will receive 90% and Australia 10% of upstream oil and gas revenues from the JPDA. The JPDA inherits the ZOC from the 1989 Timor Gap Treaty, altering only the division of revenues. Greater Sunrise is deemed to lie 20% in the JPDA and 80% in Australian territory.
2002
 

21 Mar 2002

Australia secretly withdraws from international processes for resolving maritime boundary disputes under the Law of the Sea (UNCLOS) and the International Court of Justice. In addition to demonstrating that Canberra knows its legal arguments are weak, this action prevents Timor-Leste from bringing the dispute to an impartial third-party arbiter, forcing it to rely on inherently unequal negotiations.

19 May 2002

Timor-Leste civil society groups and opposition political parties protest the imminent signing of the Timor Sea Treaty between Timor-Leste Prime Minister Mari Alkatiri and Australian Prime Minister John Howard. The 2006 CMATS treaty applies Timor-Leste laws (there were none) and Australian laws from this date to legitimize Australia’s exploitation of contested areas.

19-20 May 2002
(midnight)

The Democratic Republic of Timor-Leste becomes an independent nation.

20 May 2002

Timor-Leste and Australia Prime Ministers sign the Timor Sea Treaty (TST) to replace the 2001 Arrangement. The substance of that Arrangement is continued, “without prejudice” to a future maritime boundary settlement which would replace the treaty. Both Governments promise to conclude a Sunrise Unitisation Agreement by the end of 2002.

19 July 2002

The first round of negotiations between Timor-Leste and Australia on a Sunrise International Unitization Agreement (IUA) concludes with both parties pledging to reach agreement by the end of 2002. The IUA will define how the Greater Sunrise field, with about 9 trillion cubic feet of natural gas will be divided. Australia (then expected to receive 82% of Sunrise upstream revenues) places a high priority on reaching this agreement so that the Sunrise project can proceed.

24 August 2002

Timor-Leste passes a maritime boundary law based on UNCLOS principles, claiming an Exclusive Economic Zone for 200 miles off Timor-Leste’s coasts. The law is retroactive to 20 May 2002.

20 September 2002

Australia awards an exploration contract for a disputed area partly on Timor-Leste’s side of the median line. Similar contracts, protested by Timor-Leste, are awarded in April 2003 and February 2004.

3 October 2002

Timor-Leste Prime Minister Mari Alkatiri writes Australian PM John Howard to propose initial discussions on maritime boundaries. A month later, Howard replies that Australia “is willing to commence discussions” after the Timor Sea Treaty is in force and the Sunrise IUA “has been completed.” On 18 November Alkatiri writes back that he sees no reason why “completion of these interim arrangements” is necessary before boundary talks start, and asks for a “swift timetable” for boundary discussions.

October 2002

Sunrise unitization agreement talks continue. Australia and Woodside want to link this agreement to the ratification of the Timor Sea Treaty, thereby holding the Bayu-Undan project (which primarily benefits Timor-Leste) hostage to Timor-Leste’s concession of most of the revenues from the larger Sunrise project to Australia.

27 November 2002

Australian Foreign Minister Alexander Downer, after an acrimonious meeting with Mari Alkatiri in Dili, says that Australia may not ratify the Timor Sea Treaty until February 2003 or later, violating both governments’ commitments to complete ratification in 2002. The oil companies say that the delay could endanger arrangements to sell gas from Bayu-Undan and Sunrise, adding to pressure on Timor-Leste’s government to promptly accept Sunrise unitization terms which unfairly benefit Australia, rather than insisting that the maritime boundaries be negotiated.

6 December 2002

Sunrise partners Woodside, ConocoPhillips, Shell and Osaka Gas announce the indefinite delay of the Sunrise project, claiming that neither the floating LNG processing plant nor the pipeline to Darwin is economically viable. Many see this as a tactic to pressure Timor-Leste to accept Australia’s wishes on Sunrise.

17 December 2002

Timor-Leste’s Parliament ratifies the Timor Sea Treaty.
2003
 

26 January 2003

The East Timor Action Network (ETAN) demonstrates in Washington to demand that Australia abide by international law. This is the first of many such demonstrations around the world over the next 2½ years.

1 February 2003

Australia, rejecting Timor-Leste’s refusal to concede sovereignty over the part of Greater Sunrise which lies outside the JPDA, says its Parliament will not ratify the Timor Sea Treaty until Timor-Leste gives in and signs Australia’s proposed version of the Sunrise International Unitization Agreement.

4 March 2003

Having received no response to his 18 November 2002 letter requesting boundary negotiations, Mari Alkatiri writes to John Howard that the TST will soon be in force and the IUA is being submitted to the RDTL Council of Ministers. He asks for an “early indication of a date” on which permanent boundary “discussions might begin, and a date by which you consider those discussions might result in a permanent boundary delimitation.” Howard replies five months later, indicating a willingness to begin talking about boundaries, with no timetable.

6 March 2003

 Australia and Timor-Leste sign the International Unitization Agreement (IUA) for Greater Sunrise.

6 March 2003

The Australian Parliament ratifies the Timor Sea Treaty. Green Senator Bob Brown is expelled for accusing John Howard of “blackmail” by delaying ratification until after Timor-Leste signs the IUA.

2 April 2003

The Timor Sea Treaty enters into force, establishing the bi-national Timor Sea Designated Authority (TSDA) to manage projects in the joint development area. It will expire in 30 years, or when maritime boundaries are established, whichever comes first.

 

Figure 28. Sunrise Unit Area defined by the IUA (tan, with dashed blue border), showing fields (green), production-sharing contracts (purple) and test wells (blue). The black line divides the Joint Petroleum Development Area (left) from the area attributed to Australia.

May 2003

Production-sharing contracts are signed between the TSDA and the Sunrise Joint Venture to replace those signed during the Indonesian occupation. Contracts JPDA 03-19 and JPDA 03-20 continue the terms of the 1995-6 contracts, as provided by Annex F of the Timor Sea Treaty, and are retroactive to 20 May 2002. The Sunrise Joint Venture currently includes Woodside (Operator, with a 33.44% share), ConocoPhillips (30%), Shell (26.56%) and Osaka Gas (10%).

12 November 2003

Negotiators from Timor-Leste and Australia meet in Darwin for the first “scoping session” of maritime boundary negotiations. Timor-Leste’s government expresses unhappiness after the talks.
2004
 

January 2004

The Government of Timor-Leste lobbies Woodside and Australia to bring Sunrise Gas to Timor-Leste, persuading Woodside to do a feasibility study on this option. Woodside undertakes the study (see August 2004 below), while continuing to threaten that a “market window” for Sunrise LNG will close unless development begins quickly.

29 March 2004

Australia ratifies the Sunrise IUA.

April 2004

New campaigns to protest Australia’s theft of Timor-Leste’s resources are launched on both sides of the Timor Sea: the Timor Sea Justice Campaign in Australia and the Movement Against the Occupation of the Timor Sea in Timor-Leste. Large protests are held in Dili.

19-22 April 2004

The first substantive round of boundary talks take place in Dili, with little results.

11 August 2004

Foreign Ministers José Ramos-Horta and Alexander Downer meet in Canberra, suggesting a “creative solution” to the boundary dispute, where Australia would provide a larger share of revenue from disputed areas to Timor-Leste, while Timor-Leste would agree to forego a permanent maritime boundary at least until the petroleum is exhausted. Three more rounds of negotiations took place from August to October, without reaching an agreement.

August 2004

Woodside presents its “Pipeline Feasibility Study Report” to the TSDA and Timor-Leste government, concluding that a pipe from Sunrise to Timor is less financially attractive than one to Darwin. Timor-Leste hires an independent expert to review the study, and Woodside incorporates some of their suggestions. However, the expert’s final review in January 2005 says that the Woodside study is still not an objective comparison of project costs. [49]

17 November 2004

Woodside suspends work on Greater Sunrise due to the failure of the governments to provide legal and regulatory certainty.
2005
 

7-9 March 2005

Australian and RDTL negotiators meet in Canberra. The following month they meet in Dili, with demonstrations across Australia. A third meeting is held 11-13 May in Sydney.

September 2005

Timor-Leste and Australia agree on the details of a Petroleum Mining Code for the JPDA, which must be formally approved before a licensing round for new JPDA areas scheduled for early 2006 can be conducted.

29 November 2005

Australian and RDTL technical delegations meet in Darwin, reaching an agreement which is not made public.
2006
 

12 January 2006

Australia and RDTL sign the Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS) in Sydney. The CMATS treaty package includes the 2003 IUA.

28 February 2006

Australia approves the JPDA Petroleum Mining Code, enabling the TSDA bidding round to proceed.

May 2006

The Timor Sea Designated Authority holds a bidding round for exploration of new areas in the Joint Development Area of the Timor Sea. Four contracts were awarded on 16 August.

12 October 2006

Australia and East Timor sign Security Arrangement on Joint Petroleum Area.
2007
 

7 February 2007

Australia tables the CMATS Treaty in its Parliament.

20 February 2007

Timor-Leste’s Parliament ratifies the CMATS Treaty and Sunrise IUA.

22 February 2007

Australian Foreign Minister Alexander Downer invokes the “national interest exemption” to enable the CMATS treaty to enter into force the following day, without a Parliamentary waiting period or ratification.

February 2007 until today

Woodside resumes engineering work on Greater Sunrise, re-processing seismic data, opening a Dili office, discussing with both governments, looking for customers and exploring development concepts. They hope to have a development concept approved by the regulators in 2008.

August 2007

The new government in Timor-Leste maintains the previous government’s objective of landing Sunrise gas in Timor-Leste.

November 2007

Australia elects a new government, but their position on Sunrise LNG is not yet clear.
2008
 

January

Woodside presents its suggestions for possible Sunrise LNG development options.
 Follow this link for more recent developments in the Sunrise project (mos Tetum).

 

Continue to Appendix 3. Fiscal effects

Go back to Appendix 1. Oil and gas in and near Timor-Leste

Return to Table of Contents

 

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua dos Martires da Patria, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
email: 
info@laohamutuk.org    Web: http://www.laohamutuk.org    Blog: laohamutuk.blogspot.com