The Greater Sunrise Oil and Gas Project
29 April 2010, updated 11 December 2013
Contents of this page
The Greater Sunrise oil and gas field in the Timor Sea has been the subject of exploration, controversy, and negotiations since it was first discovered in 1974. In particular, the question of where to liquefy the natural gas -- converting it into LNG which can be shipped to overseas customers -- has been vociferously debated since Indonesia was forced out of Timor-Leste in 1999.
After moving ahead in fits and starts, the Sunrise project is now getting closer to reality. This web page will include information and analysis about the project, especially events in 2010. For background and basic information, see the references linked to from the history section below.
Since 2010, the discussion over Greater Sunrise has intensified, with Timor-Leste’s government, other Timorese politicians and NGOs, Woodside, the Australian government and many commentators offering their views. Timor-Leste media have been filled with polemics and misinformation regarding the Greater Sunrise gas field and the LNG plant that will go with it. La'o Hamutuk is a Timorese civil society organization which hopes that this project will give the maximum benefit to the Timorese people. We are concerned that many of the reports misrepresent the reality of the situation, which has economic, legal, technical and environmental aspects, not only politics, and we hope that this web page will help people better understand the issue.
In February 2008, La'o Hamutuk published a book Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges, which is on-line in English and Bahasa Indonesia, with a summary in Tetum. The report includes a history of relevant events from 1970 through 2008.
The Sunrise controversy is entangled in the troubled history of maritime boundary negotiations between Timor-Leste, Australia and Indonesia which dates from before the Indonesian invasion. Follow this link for texts and commentary on the 2006 CMATS agreement or read a La'o Hamutuk Bulletin overview report from that time or a later 2007 article. CMATS has some time limits, including that if a Sunrise development plan has not been approved by both Timor-Leste and Australia by February 2013, either country can unilaterally cancel most provisions of the treaty.
In 2004, La'o Hamutuk wrote a briefing paper for Timor-Leste's boundary negotiators entitled The Case for Saving Sunrise, suggesting that there was no advantage to Timor-Leste in developing the Sunrise field quickly, and that a delay of 10-15 years would greatly increase the benefits Timor-Leste's people would receive. Six years have passed, and our subsequent research confirms this view, which is now supported by many of Timor-Leste's leaders.
During 2008 we published a primer on LNG Basics and an article on potential benefits from Sunrise LNG in Timor-Leste.
The Sunrise project is operated by Woodside (Australia), which has a 33% share in the project shared with joint venture partners ConocoPhillips (USA, 30%), Royal Dutch Shell (UK/Netherlands, 27%) and Osaka Gas (Japan, 10%). They maintain that the development plan is strictly a commercial decision, to be made in the best financial interests of their stockholders and the Australia and Timor-Leste governments, under the rules as defined by the 2002 Timor Sea Treaty, the 2003 Production-Sharing Contracts, the 2003 International Unitization Agreement and the 2006 CMATS Treaty.
In June 2008, Woodside presented a "Concept Screening" report to the Australian and Timorese regulators, finding that a pipeline to Timor-Leste would be less profitable than a floating LNG project or a pipeline to Darwin. After world oil market prices collapsed later that year, they redid the study and reached the same conclusions the following year. Woodside promised to announce their decision between a mid-sea floating LNG plant (the first in the world) and expanding the existing LNG plant in Darwin by the end of 2009, but did not meet their deadline. Woodside's Annual Report from 2009 explained their view of the Sunrise project as of the end of that year.
Shell, which would like to develop floating LNG technology for use at other fields, has long supported this option. ConocoPhillips, on the other hand, built and operates an LNG plant at Wickham Point in Darwin, where the gas piped from Bayu-Undan is processed. They would like to expand that facility to liquefy Sunrise gas as well.
In mid-2008, Timor-Leste's State Secretariat for Natural Resources (SERN) created a Sunrise Task Force to develop their own information on the technical, economic and social aspects of the Sunrise project. The Task Force, with help from Petronas and a bathymetric (seabed depths) study supported by Korea Gas, concluded that a pipeline to Timor-Leste is technically possible -- a view which is also held by Woodside and Australia in recent years. Although the Task Force report has not been made public, it questions Woodside's determination that a pipeline to Timor-Leste is less profitable than the other options. However, as neither side has yet shared the details of their assumptions and analysis with the other, it is difficult to perform an independent assessment. Only one option will be chosen at the end of the day, regardless of whether others are also feasible.
La'o Hamutuk arranged a briefing by the Sunrise Task Force for ourselves and other civil society groups in February 2010, but we were not given technical details and are not at liberty to publish specifics. However, it is clear that the united Timor-Leste view is that the pipeline must be brought to Timor-Leste -- that this is the only fair outcome, since the pipeline for the other large gas field in the Timor Sea (Bayu-Undan), has already been built to Australia. Timor-Leste's Government hopes to use an onshore LNG plant in Beacu (Viqueque district) as the engine and centerpiece of a "national petroleum corridor" stretching westward along the south coast to Suai. By developing local industry, expertise and spinoffs, they hope to wean this country away from dependency on oil rents (royalties and taxes) and toward productive activities which can continue to thrive after the Sunrise and Bayu-Undan fields are empty. La'o Hamutuk hopes that this is possible, although we believe that not enough has been done yet in education, law-making, planning and infrastructure sectors for Timor-Leste to maximize its benefits from Sunrise LNG.
Australia has largely remained silent on the pipeline route, saying it's a matter for the companies to decide, However, this is disingenuous as Australia actively negotiated the three relevant treaties with Timor-Leste, and had largely achieved its goals by 2007. On 28 April 2010, the Australian Ambassador responded to accusations that his government had threatened Timor-Leste.
In early 2010, the Government of Timor-Leste decided to take a hard public line: they would not approve any development plan which didn't include a pipeline to Timor-Leste and an LNG plant on the south coast. A 13 January press release Woodside’s development plans will not be approved for Greater Sunrise (also Portuguese) provoked extensive coverage in the local and international media. Over the next week, comments emerged from Woodside, Australia and Petronas, and it was clear that Timor-Leste had brought renewed attention to the debate. However, Timor-Leste has consistently said that it will keep its legal commitments in treaties and contracts Timor-Leste has already signed.
A month later, the RDTL Government publicly attacked former Prime Minister Mari Alkatiri (also Tetum) for offering suggestions on the Sunrise question. When President Jose Ramos-Horta suggested that a floating plant might be a compromise decision, the Government also disagreed. On 10 April, the Government spokesperson reaffirmed his January statement that any plan not involving an LNG plant in Timor-Leste would be rejected.
After repeated delays, on 29 April 2010 the Sunrise Joint Venture announced its preference for a floating plant. Timor-Leste's government responded (also Tetum) late that night, denouncing Woodside's "unacceptable level of arrogance" and reiterating that Timor-Leste "will not accept or endorse this concept and it’s associated plan now or in the future." Woodside's announcement was echoed by Shell and reported in the media, as was Timor-Leste's rejection.
Woodside said it plans to propose a Field Development Plan to Timor-Leste and Australian authorities in the next few weeks, and hopes to move the discussion past polemics to details. CEO Don Voelte was proud of their decision in his speech to Woodside's Annual General Meeting (see page 5) the following day.
Timor-Leste, on the other hand, "considers Woodside’s announcement a waste of valuable time, money and human capital; presenting a concept preference before appropriate consultation with the 'resource-owners'."
On 18 May, Woodside executives attempted to deliver their proposed Field Development Plan to the National Petroleum Authority (ANP) in Dili, but ANP refused to accept it. ANP president Gualdino da Silva said "the ANP was not in a position to accept the folders and they must take them back because they have not done all their homework," according to Australian media reports. For more than a year, the ANP has been telling Woodside to do a comparative analysis of three options (Darwin, Timor-Leste and floating) and obtain regulatory approval for a design concept before the company prepares a detailed plan like the one it tried to present.
During the ensuing few weeks, the Sunrise debate was a subject of much coverage in the local and international media, with varying degrees of accuracy and objectivity. La'o Hamutuk continues to discuss the issue with many parties -- ANP, SERN, as well as the representatives of Woodside and Australia in Timor-Leste, among others -- to try to understand what is happening.
Two recent press releases from the Timor-Leste Government maintained their position that the pipeline must come here, although some of the arguments seem a bit strained: Timor-Leste requires equitable benefits through Greater Sunrise (31 May, also Portuguese) and A lesson for Woodside in compliance; Timor-Leste can wait (4 June). The "Equitable benefits" press release cites a 2002 ACIL report, a 2002 Australian Parliamentary Report and a 2009 Poten report which we have made available on this website.
From the other side, Woodside published a "Floating LNG at Sunrise" presentation their CEO gave at a UBS Resources Conference in Sydney on 3 June 2010. The company wrote to ANP in mid-June saying that it would present separate evaluations of three development options.
As both sides kept talking past each other, with continuing media coverage about the impasse, the Timor-Leste Government issued a press release (also Portuguese) on 22 June confirming that negotiations with Australia (albeit not with Woodside) continue through normal channels. Articles in international media tried to summarize the controversy, such as this one from Pacific Scoop.
The Sunrise Commission and Joint Commission met in Dili on 28 and 29 September. The previous day, an all-day seminar at the National University of Timor-Leste rallied students and others to support Timor-Leste's demand for the pipeline to come here, and two days of demonstrations and marches greeted the negotiators. During the talks, which were occasionally heated, Woodside presented Australia and Timor-Leste with three loose-leaf binders, presenting their analysis of pipelines to and LNG plants in Darwin, Beacu, and floating in mid-water. Spokespeople for Timor-Leste claimed that this indicates a change of Woodside policy and a willingness to evaluate the three alternatives, although Woodside maintains that it still prefers the floating option. Woodside's third-quarter report to Australian stock exchange regulators said simply "In September the Sunrise Joint Venture submitted its Concept Evaluation Reports to the Joint Petroleum Development Area and Australian regulators at the Sunrise Commission in Dili."
Although Woodside has said nothing on the subject since then, Timor-Leste's government has issued several press releases: Timor-Leste has active regulators in the petroleum sector (2 November 2010), Timor-Leste extends a lifeline to Woodside (9 Nov) and Government of Timor-Leste concerned about Woodside’s corporate downgrading by the Standard and Poor’s Ratings Service (8 Dec). As of early December, Timor-Leste has not responded to the Concept Evaluation Reports that Woodside submitted nine weeks earlier.
Separately, Timor-Leste's Ministry of Finance is investigating whether Woodside and other companies owe back taxes to Timor-Leste for selling Production Sharing Contracts, including Woodside's sale of their 40% share in JPDA06-105 to Eni in 2007.
The Sunrise negotiators met in December, but talks broke down, reportedly because Australian representatives were frustrated with Timor-Leste's insistence that the LNG plant be built here.
On 24 January 2011, Timor-Leste's government issued an unusually confrontational press release: Greater Sunrise negotiation forces Woodside to halt all operations. Later that week, President Jose Ramos-Horta, FRETILIN and Mari Alkatiri urged continuing dialogue, while Woodside reiterated its position that it follows the law and prefers a floating LNG plant, as described in The Australian. The next Sunrise Commission meeting was scheduled for March, but did not take place.
Timor-Leste's General State Budget for 2011 was promulgated in mid-February. La'o Hamutuk's December submission to Parliament expressed concern about $12.4 million of "Timor-Leste’s money being spent on research and studies related to a possible onshore LNG plant, a project that may never happen. Although the Timorese public and the Government want the Sunrise gas to be piped to an onshore LNG plant in Beaçu, Woodside remains committed to a mid-sea floating LNG plant, which it thinks is more profitable. It seems unlikely that Woodside will believe Timor-Leste’s studies more than its own research, or that additional information (including vituperative press releases) from Timor-Leste will change Woodside’s view that a Timor-Leste onshore LNG project would earn the companies $2 billion less than a floating project. If Woodside is not persuaded, the project will remain stalled, and Timor-Leste’s $12.4 million or more will have provided work for foreign consultants and contractors, but no benefits for our people."
Woodside released their 2010 Annual Report (5 MB interactive PDF) on 21 February. See the Sunrise slides from outgoing CEO Don Voelte's presentation. The report says that "Sunrise also reached a major milestone during the year, with the Joint Venture selecting Floating LNG as the preferred development concept for the Greater Sunrise fields. In September 2010 we submitted concept evaluation reports to the Sunrise Commission, and the Australian and Timor-Leste regulators. We look forward to progressing the project in 2011 in line with international treaty obligations." According to the Annual Report, Greater Sunrise contains 5.13 trillion cubic feet of dry gas and 225.9 million barrels of condensate. Click here for the two pages on Sunrise.
On 10 March, an article in The Australian reported that Timor-Leste might withdraw from the CMATS Treaty, and the LNG trade press reported that Australia "sees no need to intervene" in the dispute over the field. The Australian elaborated two days later, as did Petroleum Economist on 21 March.
An IMF Staff Report on Timor-Leste released in early March summarized hopes for spending more than ESI, saying that the Government feels that: "The current ESI does not capture potential revenues from the Greater Sunrise field, a confirmed petroleum resource. Moreover, more natural resources might be discovered." The IMF recommended that "the Ministry of Finance should begin evaluating [Greater Sunrise's] potential effect on petroleum wealth and fiscal financing. Perceived petroleum wealth from Sunrise is already informing wider thinking in government and civil society about sustainable spending levels, and quantification of the potential revenue flows would help to inform and guide that discussion. In particular, this exercise would allow the authorities to manage expectations and encourage a more realistic assessment of the potential addition to petroleum wealth from Sunrise."
The bi-national Joint Commission met in Dili in late March, although the Sunrise Commission did not meet. A banner headline in Diário Nasional (click on the headline to see the article) reported that Woodside had accepted that the pipeline will come to Timor-Leste, but in reality the company's preference for a floating LNG plant had not changed. La'o Hamutuk is saddened by the poor understanding of this critical issue among journalists and others.
During the beginning of 2011, three nearby floating LNG projects -- Flex LNG in Papua New Guinea, Shell's Prelude in Western Australia and the GDF Suez/Santos Bonaparte in Australia's part of the Timor Sea -- moved closer to construction. In June, Petronas hoped that its planned floating LNG plant in Western Malaysia would be first to begin operation, in early 2015.
At Woodside's Annual General Meeting on 20 April, outgoing CEO Don Voelte expressed "disappointment" with Timor-Leste's treaty compliance in his prepared remarks, which he developed further for the Australian media. The following day, Timor-Leste's government responded that Voelte's comments "dishonour Timor-Leste", generating further coverage. On 27 April, Timor-Leste cited an Australian Chief Minister: "Northern Territory Government confirms economic advantages of onshore processing."
Woodside selected former Exxon-Mobil executive Peter Coleman as their new head, and in mid-May he restated Woodside's commitment to a floating LNG plant for Greater Sunrise gas. At the end of May, outgoing CEO Don Voelte expressed his disappointment over the Sunrise deadlock.
Meanwhile, Timor-Leste leaders continued to debate negotiating personnel and strategy. Former Australian Foreign Minister Alexander Downer visited Timor-Leste, urging the companies to "be generous" but declining to state his view on the LNG plant siting debate. Timor-Leste President Jose Ramos-Horta reiterated concerns about "untested" floating technology, while Australia's Minister for Resources and Energy Martin Ferguson continued to support the companies' preference for this option.
La'o Hamutuk has published Cowboys, Ogres and Donors: A Decade of Corporate Social Responsibility in Practice by Mandy White, who represented Woodside in Timor-Leste in 2007-2008. The paper sharply criticizes Woodside's "ogres at the helm" and "sycophantic senior staff" taking a Public Relations approach, "not making even tokenistic efforts" to develop Timor-Leste. Whyte characterizes the company's "blundering arrogance:" "Woodside steadfastly refused to regard the Timor-Leste Government as a partner in the development of the Sunrise fields, seemingly characterising them not only as a 'thorn in the side,' but also as devious and untrustworthy. ... [D]riving forward to a final investment decision without the Timor-Leste Government demonstrates an arrogant lack of regard for the relationship." After a resulting Radio Australia interview with Mandy Whyte, Woodside sent a statement to Radio Australia: "Woodside and its Sunrise Joint Venture participants are committed to progressing the Sunrise LNG Development in a way that provides sustainable long-term benefits to Timor-Leste in the form of opportunities for local participation, employment, training and community development. The Joint Venture continues to work closely with several organisations to deliver a range of social investment projects to deliver sustainable benefits to the health and education of the Timorese. These projects include World Vision's Water for Life program and the Alola Foundation's Maternity Packs and Safe Motherhood program." Whyte's article prompted further discussion, including this blog.
On 13 June, Reuters reported that a Shell senior executive planned to build the company's second floating LNG plant at Sunrise. The Government of Timor-Leste responded that Shell’s conflict of interest in Greater Sunrise excludes them from development dialogue, because the company is building floating LNG for projects around the world, leading them to adopt a "bulldoze PR campaign to coerce Timor-Leste and Australian citizens to pay for the technology," and the issue was picked up by the media. La'o Hamutuk understands that all private sector companies (especially the larger ones owned by investors) want the highest profit from all their activities, so that every company naturally decides its preferences regarding a particular project in the context of its worldwide balance sheet. This reality often leads oil companies, including Shell, to act against local interests, environment or communities, but is a characteristic of all such companies.
At a June conference, Australian petroleum engineer Geoff McKee explored possible ways out of the current Sunrise development impasse (4MB), suggesting a win-win solution which would allow Woodside to proceed with floating LNG while bringing some Sunrise gas to Timor-Leste to enhance energy security.
On 1 July, National Petroleum Authority President Gualdino da Silva gave a presentation on the Greater Sunrise project to an energy conference in Dili. He explained that Sunrise negotiations are temporarily suspended pending resolution of different views about who owns the gas after it is extracted from the seabed. When this is resolved, talks will continue about development options. The ANP also has doubts about the joint venture's reducing its estimates of the size of the Sunrise reserve, and has engaged an independent expert to review them.
With advance press coverage, new Woodside CEO Peter Coleman visited Dili on 22 August and met with Vice Prime Minister Jose Luis Guterres and Secretary of State for Natural Resources Alfredo Pires. Before he came, Coleman described the reasons for the visit: "I'm hoping for a re-establishment of earlier relationships. We hope to get dialogue going again ... to really understand where we have differences. ... there are far more things we agree on than we don't agree on." However, Coleman reaffirmed Woodside's view that a floating plant is the only option the company will discuss: "I think it's too early for us to move away or even have discussions on a different development concept for Sunrise. It just starts to cloud discussions and confuse. ... Before we start going down the path of saying 'My idea is better than your idea', the first thing to do is establish a relationship, establish one where we can sit in a room together and thrash out these issues."
After the meeting, Jose Luis Guterres reiterated Timor-Leste's position: "We want the Sunrise pipeline to come to East Timor, as the treaty with Australia talks about the fair distribution of the resources and that those resources should benefit the people of East Timor and Australia. ... There is no justification for Australia already having benefited from a pipeline for development of the gas in Darwin and that East Timor has none.” A month later, President Jose Ramos-Horta said that Timor-Leste's impression of Coleman was "very positive, ... but we have not made any progress in terms of the dispute..."
As both sides are maintaining their positions, the get-acquainted talks made no breakthroughs. Nevertheless, the Sydney Morning Herald optimistically reported a New dawn for Timor Gas on 10 October, although a cover article in the Petroleum Economist industry magazine explained that The great game of Greater Sunrise is far more complicated. Based on the 10 October SMH article, the Timorese newspaper Diário wrongly reported once again that "Woodside Accepts Pipeline to come to Timor-Leste" on 19 October, citing SERN Alfredo Pires (SERN staff says he didn't say this), but acknowledging deep in the article that Woodside had not confirmed that they now agreed to build a pipeline to Timor-Leste.
On Friday 21 October, Woodside released their third-quarter report to the Australian Stock Exchange. Its seven pages mention Sunrise briefly: "Woodside continues to build on engagement with both the Timor-Leste and Australian governments. ... Woodside CEO Peter Coleman visited Dili, Timor-Leste in August and held constructive meetings with Timor-Leste government representatives. Woodside is committed to continue discussions on the Greater Sunrise development." Tea-leaf-readers in the international media were quick to report a change in the company's position. However, La'o Hamutuk spoke with key people in Woodside and the Timor-Leste government on 22 October, and both sides affirmed that their strong preferences for mutually exclusive development options had not changed, although the tone of discussions is now less frosty than it was during Don Voelte's tenure.
On 16 November, during the Parliamentary debate on the proposed 2012 State Budget for the State Secretariat for Natural Resources, some Parliamentarians asked for a detailed study of how many Timorese workers could get jobs at a Sunrise LNG plant in Beacu (La'o Hamutuk's 2008 Sunrise report discusses this issue in depth). Secretary of State Alfredo Pires, citing PNG's experience, replied that about 10,000 jobs would be available during the construction phase (including feeding and housing foreign workers), but only 100-200 during plant operation. Pires was confident that Woodside will eventually accept bringing the pipeline here, citing his better relationship with their new CEO, prompting articles in the local and international media. Woodside then reasserted its "desire" to see the project developed. Parliament approved $6.3 million for SERN in the 2012 State Budget on 25 November, including $1.8 million for the National Petroleum Authority (ANP) and $2.5 million for the new TimorGAP National Oil Company.
The 2012 budget includes $5.5 million for engineering and studies for the pipeline and LNG plant (first three lines in the table below), and another $48.3 million for studies and infrastructure associated with the plant. This is only one-third of the $163.8 million allocated for the Tasi Mane southwest coast petroleum infrastructure project and a small fraction of the total project costs which will be spent over many years.
(In October 2012, the Government asked Parliament to shift $50 million from 2012 Tasi Mane allocations to other budget lines, with the understanding that it would be reappropriated for Tasi Mane in the 2013 state budget.)
Also in November 2011, the new Timor Plaza upscale shopping mall proudly announced that the TimorGAP national oil company will rent offices there, and quoted TimorGAP President and Sunrise Commissioner Francisco da Costa Monteiro "There is much more hope now than ever before. If you look back at 2007, 2008, there was a lot of skepticism about the possibility of bringing in the pipeline," but now Woodside recognizes that it is technically feasible. Monteiro added that the main focus of the negotiations was now centered around the commercial viability of the project.
Just before Christmas, a Malaysian newspaper reported the Malaysian company Petro-Mekong Corp Sdn Bhd, together with Germany's Europipe GmbH, was close to getting a contract to be build a gas pipeline from Sunrise to Timor-Leste, although Woodside told La'o Hamutuk they are not involved in this process.
In January, Secretary of State for Natural Resources (SERN) Alfredo Pires, together with Prime Minister Xanana Gusmão and the Ministers for Finance, Infrastructure and Tourism, visited the Europipe factory to look at gas pipes that could be used for Sunrise. When they returned from Germany and Qatar at the end of the month, the political leaders told local media that both countries were eager to help Timor-Leste in petroleum, education, tourism and infrastructure. Unfortunately, media in Timor-Leste often confuses the Supply Base the Government is currently building in Suai with the LNG plant which the Government hopes will be built in Beacu some day.
As Timor-Leste entered the 2012 election season, Sunrise became fodder for political squabbles, with the Government and the largest opposition party blaming each other for not reaching an agreement to enable the project to proceed with an LNG plant in Timor-Leste. However, SERN officials promised that the results of their studies on Sunrise would be available to whomever wins the June Parliamentary election.
According to article 12.2(a) of the CMATS Treaty (which enables Sunrise development by deferring discussion of maritime boundaries until the project is finished), either Australia or Timor-Leste can unilaterally cancel most of CMATS if no Sunrise development plan has been approved by 23 February 2013. Although neither side has said they want to do that, on 16 January 2012 Timor-Leste President Jose Ramos-Horta hinted at re-opening the prohibited boundary discussion by asking 1,000 geologists and geology students gathered for a scientific conference in Dili to use their expertise to prove that Timor-Leste and Australia are on the same continental shelf, undercutting Australia's historical argument against a media line boundary. If there is no continental shelf boundary in the Timor Sea, international legal principles would put all of Sunrise in Timor-Leste's jurisdiction.
On 18 January, the Council of Ministers decided to award a contract for "design and construction of the offshore pipeline, as well as a detailed marine survey" to JP Kenny (Indonesia), an international oil services company. La'o Hamutuk believes that this contract is actually for pipeline route analysis, not detailed design or construction.
Many in the industry and trade press are perplexed by Timor-Leste pushing ahead and spending million of dollars on a development model that the companies holding the contract for the resource do not want to pursue. On 1 February, the Petroleum Economist called Greater Sunrise "stalled" and "troublesome" from Woodside's perspective, speculating that Woodside might want to sell its 33.4% share in the "effectively stranded" Sunrise resource, but could have difficulty finding a buyer.
Also on 1 February, Timor-Leste's Council of Ministers approved a resolution (Portuguese original) which "instructs the Ministry of Foreign Affairs to coordinate an interdepartmental working group and provide this working group of technical equipment and scientific resources necessary to determine the baselines of Timor-Leste, as well as the legal instruments necessary for the delimitation of the country’s maritime border," and to follow up on ratifying the 1982 UN Convention on the Law of the Sea (UNCLOS). The working group will work on the maritime boundaries with Indonesia and Australia, neither of which has been resolved. It is based on the claims made by Timor-Leste in its 2002 Maritime Boundaries Act.
On 17 February, ConocoPhillips attorneys published a patent Cautionary Notice for a "Process of heat integrating feed and compressor discharge streams with heavies removal system in a liquefied natural gas facility" in Diario Nasional, to warn anyone who might try to make "unauthorized use" of their invention that the company would "seriously respond."
La'o Hamutuk is worried that Timor-Leste may spend billions of dollars in public funds (direct outlays or loan repayments) to subsidize the Sunrise pipeline/LNG plant or to change the project economics to persuade a reluctant or disreputable company to undertake a less profitable development model. Total projected downstream (LNG plant) revenues to Timor-Leste are about $3.4 billion (see graph above), much less than the $16 billion Timor-Leste would receive from Greater Sunrise upstream (extraction) wherever the pipeline goes. With Bayu-Undan's revenue lower than previously anticipated and running out in 12 years, we hope that policymakers consider all aspects of the issue carefully to ensure that Sunrise development will maximize the benefits to Timor-Leste's people.
Woodside published their 2011 Annual Report in February. The two pages on Greater Sunrise highlight the new "forward-looking relationship" between the CEO and Timor-Leste's government, and expect this "positive engagement" to "underpin ongoing dialogue in 2012."
On 17 February, Prime Minister Xanana Gusmão met with Woodside CEO Peter Coleman in Darwin, which the PM described as "positive and constructive." The Sydney Morning Herald quoted the Prime Minister: "It was a very good discussion. I could see that they understand our perspective, why we want to bring the pipeline to our shore." An Australian commentator speculated the visit could indicate a thawing of relations between Timor-Leste and Australia.
On 19 April, Timor-Leste's voters elected former general and resistance leader Taur Matan Ruak (TMR) as their next president, replacing Jose Ramos-Horta. Although Ramos-Horta had been involved in the Sunrise issue for a decade, TMR has been largely silent. In a pre-election questionnaire, La'o Hamutuk asked the two candidates in the runoff election what Timor-Leste could do to resolve its maritime boundaries with Australia and Indonesia, and TMR replied "I will continue to hold discussions. These discussions should include the fisheries issue. For the maritime boundary problem I will not make radical changes, but continue previous policy. I see that Australia is always a little problem for negotiations, because they want to get a big portion. Most of their agreements depend only on political negotiations, not legal. Like maritime boundaries with Papua New Guinea and New Zealand, Australia got more."
TMR's answer prompted Australian newspapers to expect him to take a "more aggressive line" than his predecessor. However, in an interview published in Australia on 28 April, outgoing President Ramos-Horta said it had been a mistake for the Gusmão government to make piping the gas from the Greater Sunrise field to Timor-Leste ''matter of national pride''. ''The issue should not have been politicised … it should have been considered on the basis of technical and economic assessments,'' he said. Ramos-Horta says he is ''frankly perplexed'' that for 12 months the government refused to talk with the Woodside-led consortium that wants to build a floating LNG processing plant above the field, rather than piping the gas to East Timor. The government even organised demonstrations against Woodside executives in Dili. ''We must be the only country in the world that has organised demonstrations against international investors,'' he said.
Although the President can set the tone of the discussion, he does not establish policy. In Timor-Leste's 7 July Parliamentary election, voters returned Xanana Gusmão's CNRT party as the leader of the next coalition Government, and therefore significant changes in Sunrise policy are unlikely.
In late April, Australia's pending imposition of a Carbon Tax on industries which emit greenhouse gases became an issue for Timor-Leste, as some believe the tax could apply to facilities inside the JPDA (which would require Timor-Leste's agreement), or to the LNG plant in Darwin which processes gas from Bayu-Undan (La'o Hamutuk estimates that apply the tax there could cost Timor-Leste around $50 million per year in lost revenues). This issue adds a new aspect to discussions about Greater Sunrise between Timor-Leste, Australia and the Joint Venture, and La'o Hamutuk is following it on a separate web page.
The Sunrise Joint Venture is working to improve its image in Timor-Leste. On 27 April, a press release from President Jose Ramos-Horta celebrated their $50,000 sponsorship of the upcoming Dili Marathon. In a profile of Woodside CEO Peter Coleman in the 3 May Wall Street Journal, the paper listed Sunrise as "Woodside's other major development project" (in addition to Browse and Pluto) which is "caught up in local politics" having been "stuck in limbo for several years."
Timor-Leste hosted the annual Development Partners meeting on 15-16 May, which included a presentation by Secretary of State for Natural Resources Alfredo Pires on the Tasi Mane project and how hard the Government has worked to bring the Sunrise gas pipeline to this country. Prime Minister Xanana Gusmão then unveiled "The People's Pipeline," a piece of gas pipe to symbolize his Government's determination to bring a pipeline from Greater Sunrise to Timor-Leste's south coast. See photos at right or listen to Radio Australia coverage.
La'o Hamutuk asked 21 political parties contesting the 7 July Parliamentary election what they would do about Sunrise and maritime boundaries, and the eight who responded (Tetum) all supported bringing the pipeline to Beacu and advocating more effectively for Timor-Leste's Sunrise interests, including boundaries. As negotiations for the new government began, the Sydney Morning Herald's editors oddly encouraged Timor-Leste to form a Government of National Unity to more effectively concede the Sunrise pipeline issue, mistakenly believing that Sunrise upstream revenues are enough to replenish the Petroleum Fund after Bayu-Undan is depleted and the Fund is overspent.
In mid-July, La'o Hamutuk raised concerns that Timor-Leste's Petroleum Fund might be used unwisely to shift Woodside's financial balance of the project toward an on-shore LNG plant.
On 28 July, the Malaysian Star newspaper published a second article on Sunrise (following up on a May article on Timor-Leste's discussions with German and Malaysian pipeline companies). The July article quotes Timor-Leste officials on the country's determination to bring the Sunrise pipeline to our shores. Unfortunately, both articles contain many errors, and exaggerates the probable benefits of the Sunrise LNG plant to Timor-Leste's economy. We hope it doesn't confuse Malaysian readers.
In late July, Peter Voser, head of Sunrise Joint Venture partner Royal Dutch Shell, told Australian investors that some LNG projects might have to be delayed. Regarding Sunrise, "Mr Voser gave no indication the decision to commit to a floating LNG project using Shell technology was in doubt. Project operator Woodside is in talks with East Timor, which wants a plant built on its soil. 'The joint venture decided to use floating LNG technology,' Mr Voser said. 'We are working on that one.' " At Woodside's half-year results briefing on 22 August, CEO Peter Coleman was more diplomatic: "the conclusion of elections in Timor-Leste gives us some clear air to get back to the table. We recently provided additional technical data to the Timor-Leste Government to help build our mutual understanding on the Sunrise development and we are looking forward to the next engagement. We are updating the costs, uncertainties and challenges of the development concepts in preparation for our next expected engagement with the Timor-Leste Government."
Timor-Leste's Fifth Constitutional Government was formed in August, and petroleum industry trade publications Upstream and Platts reported that it remains firmly committed to bring the Sunrise pipeline to Beacu. Alfredo Pires, promoted to the new position of Minister of Petroleum and Mineral Resources, explained this to Radio Australia in mid-September.
Developments in other gas fields near Sunrise (but in undisputed Australian waters) moved along, including the Tassie Shoals methanol project (audio) and exploratory drilling in the Heron fields (September and October updates).
In early October, the Australian Broadcasting Company aired a documentary "Taxing Times in Timor" which explores the Sunrise pipeline controversy as well as the oil companies' efforts not to pay their fair share of taxes. Watch it on the ABC webpage (including streaming video) or read their transcript and reference links. ABC posted comments from Woodside, as well as longer video interviews with Timor-Leste's Prime Minister (64 MB) and Finance Minister (45 MB). La'o Hamutuk wrote a blog filing in some gaps in the program. The program provoked and extensive discussion in Timorese society and media, which we summarize on Making the Oil Companies Pay what they Owe.
On 15 October 2012, another ABC report added to attention and confusion about the treaties between Australia and Timor-Leste, especially the 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS) which describes the Sunrise revenue split and other issues. Although the CMATS treaty and the International Unitization Agreement resolved some issues to enable the Sunrise project to proceed, it does not establish a maritime boundary between the two countries -- no such boundary exists, although both Timor-Leste and Australia had often asserted claims before 2006. In fact, CMATS Article 4 bans Timor-Leste and Australia from negotiating, court cases, speeches or any other action to establish a boundary: "Neither Australia nor Timor-Leste shall assert, pursue or further by any means in relation to the other Party its claims to sovereign rights and jurisdiction and maritime boundaries for the [50-year] period of this Treaty." A 2009 La'o Hamutuk briefing paper (also Tetum) has more detail, as does a 2006 article in our Bulletin.
The ABC radio and television report (transcript with comment, audio, original text) interviewed Timor-Leste's attorney Pierre-Richard Prosper and an Australia law professor, provoking subsequent comment from Australian and Timor-Leste officials and extensive coverage in the Timor-Leste media. Many commentators appear not to understand that Article 12 of CMATS -- negotiated and signed by Australia and Timor-Leste in 2006 -- outlines a process for either country to withdraw from most of the treaty if a Sunrise development plan has not been agreed by February 2013. Although Australia would prefer that Timor-Leste not implement this provision, it would be less offensive than Australia's secret, unilateral withdrawal from international treaty mechanisms for resolving maritime boundary disputes in March 2002, two months before Timor-Leste became a sovereign state. On 22 October, the Australian Financial Review reported Mr. Prosper's intention to "light a fire" to resolve the Sunrise debate, suggesting that "moving monies around the table" could satisfy all parties' concerns as "anything is commercially viable."
Woodside issued its Third Quarter report to the Australian Stock Exchange on 18 October. The company remains publicly positive on Sunrise "Following the provision of requested technical data to the Timor-Leste Government, further discussions were held in Timor-Leste in September and a timetable agreed with the Timor-Leste Government for the first of a series of technical workshops. Woodside, its joint venturers and the governments of Timor-Leste and Australia are aligned in their desire to develop the Greater Sunrise fields. Woodside believes that through regular, open and constructive dialogue between the parties a mutually beneficial development outcome can be achieved." The Company also published an Sunrise Current Status report, elaborating a little on their community projects and tax issues. In December, Woodside changed its representative here. Brendan Augustine, who has represented the company in Dili since 2009, will rotate to Perth, to be replaced by John Prowse.
During November and December, discussion of the Sunrise and Tasi Mane projects increased in Dili and Suai, with the Government organizing workshops and seminars to increase information about and support for the project. Unfortunately, detailed information and facts to support claimed benefits were usually not presented. Since public understanding of the Sunrise project is limited, it is often difficult for journalists, citizens, and civil society groups to develop informed views on how it should proceed. Most discussion focused on the first component of the Tasi Mane project, the Suai Supply Base, for which community consultations are already underway. Petroleum Minister Alfredo Pires stated that the Tasi Mane Project will provide 40,000 jobs for Timorese workers, although he declined to explain further. He also claimed that the Suai Supply Base, Betano refinery and South Coast highway are worth doing regardless of whether the Sunrise pipeline comes to Timor-Leste.
In one example, on 28 November, The Australian printed an article quoting Western Australia Premier Colin Barnett speaking out against floating LNG for Woodside's Browse project off the coast of Western Australia, which he called "silly" because it would deprive his state of jobs and domestic gas supplies. Ten days later, Timor-Leste's government issued a press release West Australian Premier and BHP Billiton take same position on FLNG as Timor-Leste which, although technically accurate, implies that Barnett's opposition to FLNG extends to Greater Sunrise, which Barnett never mentioned. Timor-Leste newspapers, apparently unaware that Greater Sunrise is not the only LNG project in the world, distorted the issue; the article at right says that "West Australia Governor Colin Barnett opposes the choice of the company Woodside which wants to exploit gas from the Greater Sunrise well with Floating (only above the sea). ... Therefore, Colin Barnett suggests that the company and the two governments (Timor-Leste and Australia) must look for a solution which gives benefits to all parties. ... Colin Barnett supports Timor-Leste's policy because the Floating LNG option will be newly tried at Greater Sunrise." In reality, Barnett said nothing about Timor-Leste or Sunrise, as he was commenting on the Browse project. After La'o Hamutuk called it to their attention, Independente published a front-page correction on 17 December. On 12 January 2013, the Australian Sunday Times reported that Barnett's cause is likely "doomed." (see below)
On 10 December, the Malaysian Star reported that the company Petro-Mekong Sdn Bhd "said it is set to finalise a technical collaboration with its international partners," including the Timorese company Nexus Meridian LDA and others, for the "multi-billion ringgit deep sea gas pipeline project in Timor-Leste."
Articles harshly critical of Timor-Leste's position have begun to appear, leading some to wonder whether there is an organized campaign to discredit this country. On 26 November, anonymous oil industry blogger Slugcatcher wrote Sun setting on Sunrise? claiming that the "inflexible attitude" of Timor-Leste's government, including assertive efforts to collect back taxes, could scare off oil companies from investing in Timor-Leste. In early December, Timorese businessman Vicente Maubocy wrote in local newspapers questioning the Lack of Proportion and Rationality of Megaproject Tasi Mane. In addition to personal attacks against Petroleum Minister Alfredo Pires, Maubocy suggests that the only way Timor-Leste could bring the Sunrise pipeline here would be to buy out the operators for $4-$6 billion (which Australia must agree to) and pay Australia 50% of the expected tax revenue, which he estimates would cost $13 billion.
La'o Hamutuk disagrees with the tone of the Slugcatcher and Maubocy articles, and we doubt the accuracy of some of their claims. However, we continue to believe that a concrete, detailed, fact-based, public discussion of the costs and benefits of the Sunrise pipeline and Tasi Mane project are critical to Timor-Leste's future, before billions of dollars are added to the more than $15 million which Timor-Leste has already spent to prepare for south coast petroleum infrastructure. We hope it will begin soon.
Following approval by the Council of Ministers on 5 December 2012, Timor-Leste formally ratified the UN Convention on the Law of the Sea (UNCLOS) on 27 December, becoming an official party on 8 January 2013. Although RDTL had ratified the Vienna Convention on the Law of Treaties eight years ago, formal accession was registered the same day.
On 25 January, Petroleum Minister Alfredo Pires told local journalists that Timor-Leste expected to withdraw from the CMATS treaty, but would continue to push for the Sunrise Pipeline and for maritime boundaries. Dili newspapers headlined this announcement on 28 January as shown at left, but many of the articles garbled the facts and confused their readers. A few days later, Minister Pires clarified that neither Australia nor Timor-Leste had decided yet whether to terminate CMATS. More current information on CMATS Treaty developments is on this page.
The lead editorial in the March 2013 Petroleum Economist magazine, entitled "Going for Broke," discusses the failure of Timor-Leste's oil revenues to improve the lives of our people, observing former "poster child" Timor-Leste now resembles a "problem child." The highly-respected, 80-year-old publication, for which subscribers pay more than $2,000 per year, urges Prime Minister Xanana Gusmão to "to put national pride to one side. He must be pragmatic and focus on ensuring Sunrise is developed and the revenues are used to underwrite the sustainable, long-term development of Timor-Leste’s non-oil economy. If this does not come to pass, it is hard to avoid the conclusion that Timor-Leste is a failed state-in-waiting."
At the end of February, President Taur Matan Ruak promulgated Timor-Leste's General State Budget for 2013, with reduced Tasi Mane appropriations compared to the Government's proposed budget. Infrastructure Fund allocations include the following lines relating to Greater Sunrise and the Tasi Mane southwest coast petroleum infrastructure project (all figures in millions of U.S. dollars), although nothing is allocated to the LNG plant, pipeline construction or refinery construction. No information is available on expenditures after 2017.
Woodside released their 2012 Annual Report (Sunrise pages) at the end of February 2013, saying that "Woodside and the Sunrise Joint Venture are actively engaging with both the Timor-Leste and Australian governments to achieve an aligned development outcome for Greater Sunrise." In his briefing on the year's results, Woodside CEO Peter Coleman reported that "On Sunrise, we have had a number of productive technical engagements with the Timor-Leste Government in recent months and I’m pleased we have been able to build on our relationship in order to share this information. Although this engagement does not represent any agreement at this stage, we continue to build on dialogue with both governments to agree on a development which satisfies the requirements of all parties." The March 2013 Sunrise Status report on Woodside's website reiterated the upbeat tone.
On 28 March, The Global Mail published Hamish McDonald's comprehensive article about petroleum history between Timor-Leste and Australia, including Sunrise: It’s Tiny, Poor, And Very Possibly Not Going To Take It Anymore. On April 1, Tempo Semanal published Vicente Maubocy's Are there Obstacles to a Pipeline from Sunrise to the Shores of Timor-Leste?
On 12 April 2013, Woodside revised its development ideas for the Browse gas field, cancelling the James Price Point LNG plant to explore FLNG and other options, as explained by media reports (see above for background).
On 18 April, Woodside reported to the Australian Stock Exchange that "Woodside has held several engagements in Q1 with [Sunrise LNG] stakeholders from the Australian and Timor Leste governments. Although these engagements do not represent any agreement at this stage, the dialogue continues developing common ground with both governments to agree a way forward. The collaborative effort will continue, engaging on all aspects of the development." The following week, Woodside Chairman Michael Chaney told the company's Annual General Meeting that "Woodside and the Sunrise Joint Venture continued to actively engage with both the Timor-Leste and Australian governments to achieve an aligned development outcome for Greater Sunrise. We shall continue to build on dialogue with both governments to reach agreement on a development which satisfies the requirements of all parties."
Also on 18 April, Timor-Leste's government issued a press release Emerging data says FLNG a costly risk for Timor-Leste, citing a new study commissioned by Timor-Leste. This release and the Woodside AGM prompted an AFR article on 25 April.
On 23 April, Timor-Leste's government formally notified Australia that it was exercising its right to arbitration under Annex B of the Timor Sea Treaty, arguing that CMATS is invalid because Australia conducted espionage in 2004 and did not negotiate the treaty in good faith. Appointing the three arbitrators could take six months, and the panel will have another six months to issue a ruling. The Australian government and media (also audio) reported this on 3 May. On 6 May, Timor-Leste Petroleum Minister Alfredo Pires (also audio) explained his reasoning, and the business press reported corporate reactions. More detailed and updated information is on our web page on maritime boundaries.
The Australian Parliament began an inquiry (all 73 submissions available here) on Australia's relationship with Timor-Leste, although it was suspended due to the mid-year election and change of government. Submissions from La'o Hamutuk, the Timor Sea Justice Campaign, Robert King, Damien Kingsbury and many others urged Australia to respect Timor-Leste's sovereignty regarding maritime boundaries. Oil companies also made submissions, including the Sunrise Joint Venture and its members Woodside, Shell, ConocoPhillips and Osaka Gas. As the Joint Venture wrote: "The Joint Venture respects the right of the Timor-Leste Government and its peoples to benefit from the development of Greater Sunrise. Commercial and government parties should now focus on building a stronger understanding of each other’s key requirements in order to reach a common interpretation of an agreement which allows the development to proceed and the benefits realised. Alignment between all stakeholders will build a stable and predictable governance regime which is required to attract investment now and in the future. This will lead to stronger relationships and delivery of significant benefits to all parties." Timor-Leste's Ambassador to Australia asked for Fairness: " the downstream pipeline to an on shore (LNG plant) in Beaço the southern coast of Timor-Leste for the LNG processing... (which) will form part of the infrastructure and economic development of entire southern coast region," while the company MEO Australia proposed an alternative Sunrise development plan, with an LNG plant on the seabed at Tassie Shoals.
In late August, Woodside confirmed that it will use floating LNG for its Browse field and continues to prefer FLNG for Sunrise as well. A few days later, Timor-Leste offered to invest $800 million in an onshore LNG plant on Timor-Leste's south coast, which was also reported by ABC television (audio).
In late November, Timor-Leste re-opened the public debate on maritime boundaries, with possibly illegal Australian actions in 2004 and 2013. -- extensive details here. At the same time, ANP President Gualdino da Silva told the Australian Financial Review that Timor-Leste continues to prefer an onshore LNG plant in its territory to "unproven" floating technology. On 10 December, Petroleum Minister Alfredo Pires told AFR that Woodisde had presented a "Concept Study" for Timor-Leste LNG, and he told ABC radio (audio) that Timor-Leste is ready to invest two billion dollars in the project.
See our web page on the CMATS treaty for detailed information about legal, arbitration, court, diplomatic, polemical, media and public arenas of the controversy between Timor-Leste and Australia about espionage, stealing legal document, and related issues in 2013-2014.
We will continue to update this web page with new developments and information on the Sunrise project.
For more information, see these web pages relating to the Sunrise project:
The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)