South Coast Petroleum Infrastructure Project
16 September 2011. Updated 19 June 2016
Tasi Mane (Male Sea -- the Tetum name for the Timor Sea between Timor-Leste's south coast and Australia) is the name for the centerpiece of the Timor-Leste Government's development strategy -- a corridor of petroleum infrastructure along the southwest coast of this country. The ambitious project is described in the Strategic Development Plan (excerpt) as "a multi-year development of three industrial clusters on the south coast which will form the backbone of the Timor-Leste petroleum industry."
This page will be expanded as the project develops. It discusses the following:
On 25 August 2011, the RDTL National Procurement Commission invited bids from consultants interested in conducting an Environmental Impact Assessment (EIA) and developing an Environmental Management Plan for eleven components of this project, as described in the Bidding Documents and addendum. Although the Bidding Documents say that the EIA should be "conducted based on Decree-Law 5/2011 on Environmental Licensing," the National Environment Directorate staff responsible to administer that law did not know about it until La'o Hamutuk brought it to their attention. Furthermore, the tender documents are inconsistent with the decree law and provide insufficient information to prepare a proper Environmental Impact Assessment. They appear to envision something like a baseline study to be submitted to the State Secretariat for Natural Resources after four months of work by nine technical experts. The EIA consultant will be paid from the Infrastructure Fund, which includes $31.1 million for Tasi Mane in 2011, of which $6.7 million had been spent by the end of August. The 2012 State Budget allocates $2.1 million for Tasi Mane "environmental studies."
The $1.1 million EIA contract was awarded to the Australian engineering company WorleyParsons which also provides support for Bayu-Undan operations. From our understanding, they have not been given enough project-specific information to analyze its environmental impacts, especially for project components other than the Suai Supply Base. According to the TOR, "The Area of EIA study works will encompass, but not limited to, the following:
WorleyParsons, the State Secretariat (now Ministry) of Natural Resources and TimorGAP submitted an EIAs for the Suai Supply Base and a "Strategic EIA" for Betano and Beacu to the State Secretariat for Environment (SEMA) in mid-2012, but SEMA feels they are incomplete and has not started the formal approval process. In April 2013, SEMA provided them to La'o Hamutuk and allowed us to post them here. We are in the process of analyzing the nearly 2,000 pages, and hope that others will do so as well.
Final Strategic Environmental Impact Assessment for Tasi Mane project (6/12): Executive Summary (4MB).
Final Environmental Impact Assessment for Suai Supply Base (5/12): Executive Summary (3MB), as well as
The Suai-Beacu highway and Betano power plant, both Category A projects under the Environmental Licensing Decree-Law, were not considered in Worley Parsons' TOR or reports. In December 2010, Timor-Leste awarded a $1.3 million contract to PT Virama Karya for preliminary design and Environmental Impact Assessment for the highway from Suai to Beacu. Their October 2011 report, summarized here, was not sent to the Environmental Licensing Department of the State Secretariat for Environment (SEMA), and no application has been made for an environmental license for the highway. In early June 2013, SEMA staff were surprised that the construction of the first 30km of the highway is already out for tender, as they have not been asked for a license.
In 2015 and 2016, TimorGAP continued a half-hearted process for Environmental Assessment for the onshore pipelines from Suai and the refinery in Betano.
In late 2010, La'o Hamutuk expressed concerns that the 2011 state budget allocates over $30 million for the Tasi Mane project, more than twice as much as the Ministry of Agriculture. We lamented the nearly exclusive focus on the petroleum industry (and resulting lost opportunities to explore other possibilities for economic development) in our July 2011 comments on the Strategic Development Plan: "Since there is consensus that Timor-Leste needs to move away from oil-dependency in the long-term, we are disappointed that petroleum processing is the only industrial development discussed. What about agricultural processing, or light industry to replace imported products? The capital-intensive oil industry will provide few jobs for anyone, including Timorese. Allocating most of our intellectual and financial resources to the petroleum sector obstructs moving to a non-oil economy after oil and gas reserves are used up in 13 years." The 2011 UNDP National Human Development Report "Managing Natural Resources for Human Development: Developing the Non-Oil Economy to Achieve the MDGs" discusses similar issues.
We also wonder about the economic viability of the Tasi Mane project, given that no private sector investors have shown interest. From an investment perspective, the returns may not justify the amount of public money being expended. The Beaçu LNG plant will require natural gas from the Greater Sunrise field which the oil companies who hold the contracts don't want to bring to Timor-Leste. The Suai supply base may not have any offshore projects to supply if there are no new discoveries after Kitan is exhausted in 2016. The Betano power plant has drawn community opposition, and the adjoining refinery will be far from Timor-Leste's main cities.
So far, nearly all the money spent on this project has gone to foreign companies, providing hardly any local employment or spinoffs. The biggest contracts to date are with local brokers for international companies, most of which were signed in the final weeks of Budget Year 2010. La'o Hamutuk downloaded these relevant contracts from the Procurement Portal; on; it doesn't yet include many contracts awarded after June 2011.
On 31 August 2011, the Betano (Same subdistrict, Manufahi district) community demonstrated to protest the Government taking 12 more hectares (in addition to the four the community had already given) for the heavy oil power station there. [The map at left, which SERN Secretary Alfredo Pires showed at a Dili environmental conference in October, identifies a 82 hectare power plant site, adjacent to a 230 hectare site for the planned refinery and petrochemical plant.]
On 12 September, Justice Minister Lucia Lobato, Secretary of State for Environment Abilio Lima, and Francisco Monteiro (representing the State Secretariat for Natural Resources) met with the community in Betano to explain the state's policies on land, environment, the heavy oil electricity project, and the Tasi Mane project.
La'o Hamutuk observed that the Government's explanations did not address the community's concerns about the impacts of this huge project on their lives, but only urged them to accept the Government's model for development. Justice Minister Lobato repeatedly said "The Tasi Mane project, the Government must move to the future, the State will use strong force to make this project a reality, to bring oil to the South Coast."
Environment Secretary Lima said "Like it or not, the state must bring this big project to benefit our nation in the future..."
SERN representative Monteiro explained that "This project will need some land, for the refinery and for the New Betano special community ... We very much agree that this project will go forward. New Betano will be a new city to support the oil industry ..."
On the other hand, the Betano community expressed their ideas about this project. They questioned the plan to take land for a refinery, petrochemical industry, and power plant. They asked about the environmental impacts from pollution and wastes which this project will produce. One community member, Manuel da Costa, said "the south coast land will be a Promised Land for Timor-Leste's development, but we children of Betano will become victims of development. We from Betano support development, but our needs must be considered."
In September 2013, Fundasaun Mahein published a report Projetu Refinaria no Petro-Kimíka: Mega Projetu ka Mega Ameasa? describing their research and recommendations from the Betano community. Their press release is in both Tetum and English.
In July 2015, La'o Hamutuk researcher Juvinal Dias made a presentation to the Timor-Leste Studies Association Projetu Tasi Mane: Mehi Ukun-Nain no Obstákulu sira (Refinaria iha Timor-Leste) (mos PDF).
In March 2016, TimorGAP held a public consultation on the Environmental Assessment for the onshore pipelines from Suai and the refinery in Betano, and La'o Hamutuk wrote them an open letter urging them to take the process more seriously.
On 2 September 2011, the Council of Ministers approved Resolution 26/2011 (also Portuguese), appointing the British Virgin Islands company Eastlog Holding PTE (with offices in Singapore) as consultant and specialist to execute an "Engineering, Procurement and Construction" contract for the Suai supply base, estimated to cost $273-$347 million. Eastlog will be paid $6.6 million, and is expected to invest $12-$15 million of its own funds in the project. When finished, the Supply Base will be leased for the exclusive use of the TimorGAP National Oil Company, which will own the project and be expected to cover an estimated $8 million in annual operating costs.
Francisco Monteiro was named President of TimorGAP on 28 September.
The 2012 State Budget allocates $164 million for the Tasi Mane project, including $100 million for the Suai supply base and $45 million for the Suai-Beacu highway, whose final price could exceed a billion dollars. La'o Hamutuk concludes that the state could be giving a $156 subsidy to every motorist who drives the road's 152-km length. Our submission to Parliament on the State Budget discusses the Tasi Mane project on pages 12-13, and the following table shows project expenditures, in millions of U.S. dollars, as authorized by the 2012 State Budget.
According to the Government's Transparency Portal, $8.3m of the 2011 appropriation of $18.9m for Tasi Mane had been spent by 18 January 2012 , although $10.5m more was committed or obligated. This appropriation is channeled through the Infrastructure Fund, which can be carried over from one year to the next without reappropriation.
La'o Hamutuk urged Parliament not to authorize funding for Tasi Mane project construction until a solid economic cost/benefit analysis has been presented and discussed by Parliament. This needs to be more substantive and realistic than the glossy visions of the Strategic Development Plan, and should include accurate and detailed cost information and revenue and employment projections for the full project cycles. We also encouraged them to insist on a legitimate EIA and genuine community consultation, with free, prior and informed consent, before spending more on any element of the Tasi Mane project. However, the budget was enacted without changes to the Government's proposal for this project.
When the Government proposed a mid-year adjustment to the 2012 budget in September, it was already clear that much of the $163.8 million allocated for Tasi Mane 2012 would not be spent this year. Therefore, in order to fund more than $50 million of additional expenses, the Government borrowed $20 million from the Infrastructure Fund designated for the Suai-Beacu Highway, and $30 million from the Infrastructure Fund which was designated for the Suai supply base to cover other expenses in 2012. The Government told Parliament that this was done on the condition that this $50 million will be reinstated for the Tasi Mane project in the General State Budget for 2013 (see below), so that the reduced expenditures during 2012 will result in a larger 2013 expenditure budget.
In April, the Government launched a Government Results portal website, which discusses Tasi Mane spatial planning, environmental studies and the highway. The portal also includes dramatic maps and drawings of project components (click on any of them to see them larger):
On 1 June, Prime Minister Xanana Gusmão named TimorGAP President Francisco Monteiro and National Petroleum Authority President Gualdino da Silva to the Investment Advisory Board for the Petroleum Fund. Their appointment raises concerns about intentions to invest Petroleum Fund assets in the Tasi Mane project, which would have great risk and may not produce a financial return, as discussed on our blog Wading deeper into an oily swamp.
Although the original General State Budget for 2012 allocated $164 million for the Tasi Mane project, most of this went unspent, and in the October 2012 mid-year Budget Rectification, the allocation was reduced by $50 million to fund veterans' benefits and other projects. The final 2012 Infrastructure Fund budget included $123 million for Tasi Mane, $10.2 million of which had been carried over from 2011. However, according to the Budget Transparency Portal accessed on 27 March 2013, only $9.3 million was spent during 2012, with another $11.3 million committed or obligations (Commitments and obligations legally expire at the end of 28 February, but the Portal is not up to date.) Although the Parliamentary process to enact the 2013 State Budget reduced total Infrastructure Fund allocations by $150 million from the Government's proposal, the appropriation for Tasi Mane was not amended, and included $101 million carried over from 2012 and $38 million added in 2013, for a total of $139,402,000. During the period 2013-2017 the Government expects to spend more than $1.3 billion from the Infrastructure Fund on Tasi Mane, nearly one third of all Infrastructure Fund spending during the next five years, and nearly twice as much as the $0.7 billion estimated in the 2012 State Budget.
La'o Hamutuk once again expressed our concern about the lack of information on total project costs and return on investment in our submission to Parliament on the 2013 Budget: "Frankly, we do not believe the high rates of return claimed for the Tasi Mane project. Before allocating additional funding for Tasi Mane, Parliament should insist on full project cost and earnings projections, expected rates of return (with underlying assumptions, data and calculations), realistically expected socio-economic benefits and spinoffs, and other concrete project information, including what happens if the Sunrise Pipeline is delayed or never comes to Beaçu. How else can you decide whether this a secure investment in Timor-Leste’s future or a multi-billion-dollar gift from Timor-Leste’s people to international contractors and oil companies?"
Our concerns were shared by Parliament's Committee on Public Finances (Committee C) which reported (Portuguese original) "The evolution of costs under the “Tasi Mane” project for 2012 is our largest concern among all major capital projects. This project has suffered several setbacks, initially because the 2012 rectification budget withdrew $50 million on the condition that it be restored in 2013, but this was not programmed by the Government. Still, of the $123.038 million remaining in the project, only 17.5% of this amount has been executed ($21.586 million). Why does the “Tasi Mane” receive $139.402 million in 2013? At first glance, we do not foresee its complete execution."
Budget Book 2 outlines the Annual Action Plan of each Ministry. The Ministry of Petroleum and Mineral Resources and TimorGAP plan the following achievements during 2013 for the Tasi Mane Project:
When President Taur Matan Ruak promulgated the State Budget at the end of February 2013, he expressed 14 concerns in a letter to Parliament (Portuguese original). The President noted that "the relative abundance of financial resources has given rise to speculative projects with inflated prices with significantly prejudice to the public interest" and lamented prioritizing infrastructure, including Tasi Mane, over human development. "Regarding the Tasi Mane project on the South Coast, the President understands the reasons that appear to justify not having changed the intended amount. However, he would like to see a public explanation of the reasons for allocating these funds, in particular when compared with other expenses with obvious social utility. For example, two kilometers of highway are likely to cost $20 million and the budget allocated to agriculture is about $25 million."
Budget Book 6 of the 2013 State Budget describes the following appropriations for the Tasi Mane Project from the Infrastructure Fund, which were enacted by Parliament. According to the final budget book published in April 2013, the Ministry of Finance changed 2014-2017 plans after the budget was approved, shown in red italics in this table. We do not know if they represent reductions in costs or merely a delayed disbursement schedule.
Budget execution for the Tasi Mane Project was very slow during 2013. At the beginning of October, 3/4 of the way through 2013, the Transparency Portal reported that less than three million of the $139 million appropriated for use during 2013 had been spent.
The Government proposed the 2014 State Budget to Parliament on 25 October 2013, including Tasi Mane appropriations from the Infrastructure Fund shown in the table at right. In addition to cancelling all funding for the South Coast Highway (although it is still in the 2014 Action Plans of TimorGAP and the Ministry of Public Works), the budget delays appropriations for the Suai Supply Base and other Tasi Mane project components. Only $46.4 million will be allocated for Tasi Mane during 2014, and another $319 million for 2015-2018, less than half of what was anticipated in the latest published version of the 2013 budget.
On 11 November 2013, the TimorGAP National Oil Company President Francisco Monteiro appeared before Parliament Committee D to explain their execution of 2013 programs and plans for 2014. His written statement (Tetum) explains that only 4.2% of the $139 million allocated for Tasi Mane is likely be spent by the end of the year, mainly for studies relating to the Betano refinery and the Beaçu LNG plant. The report lists dozens of reasons the projects are moving slowly, many of which involve waiting on other institutions. Even though the proposed budget does not appropriate any money for the South Coast Highway, TimorGAP is moving full steam ahead, and intends to start construction in May 2014 spending more than $60 million on it during 2014. TimorGAP expects to get the money from a mid-year (rektifikativu) budget amendment during 2014. If this is indeed the Government's plan, the 2014 budget proposal violates article 22.3 of the Budget and Financial Management law, which requires that the budget include information about planned expenditures for the next two years.
On 28 January 2013, Minister of Petroleum and Mineral Resources Alfredo Pires and Minister for Public Works Gastão de Sousa signed a formal agreement to move ahead with the first 30 km of the highway, from Suai to Fatucai/Mola.
On 10 April Tempo Semanal published an opinion article (Tetum) by Flavio Ximenes analyzing the dubious economic benefits of the highway and urging more concrete analysis.
Under the Decree-Law on Environmental Licensing, national and regional roads longer than 10 km are Category A projects, requiring an Environmental Impact Assessment (EIA) and Environmental Management Plan before the Government can issue an Environmental License to allow construction to begin. In 2011, Timor-Leste paid the Indonesian company PT Virama Karya $1.3 million for a preliminary design and EIA for the Suai-Beacu highway (summary). However, Virama Karya's report was never submitted to support an environmental license application, and WorleyParson's Suai Supply Base EIA and Tasi Mane Strategic EIA (see above) do not mention the highway, other than to say "The impacts associated with the construction of ... the highway between Suai and Beaco (~170 km)... are excluded from this EIA scope." In early June 2013, Environment Directorate staff were surprised that highway construction is already out for tender, as they have not been asked to issue a License. In November 2013, TimorGAP's presentation to Parliament neglected to include environmental licensing in their schedule and plans to start building the highway.
Nevertheless, the Government has begun the contracting process for the Suai Supply Base and the Suai-Fatucai highway segment, and on 16 April 2013, the National Procurement Commission (NPC) invited bids to construct this segment. Eligible bidders must have executed two similar projects valued at over $240 million during the last decade and have average annual construction turnover of at least $225 million/year. No Timor-Leste companies can meet this requirement, although 14 international companies had expressed interest during the first two weeks. Following a "pre-bid meeting" on 23 May (minutes and presentation), Petroleum Minister Alfredo Pires announced that 49 international companies had bid for the project, including many from China. When local contractors complained, Minister Pires said that they did not have the capacity to build projects like the highway or the airport to necessary quality standards. He explained that when a poor-quality international airport causes a plane crash and kills people, it's not the government's responsibility, but the company which built it which is responsible." As the number of bidders approached 80, local contractors' protests escalated, joined by some voices from business and civil society.
Prospective bidders have to purchase the 175-megabyte Tender Documents for $150, but the National Procurement Commission believes that they should be public and has given La'o Hamutuk permission to post them on our website. Due to size constraints, we have left out many and have reduced the resolution of some -- prospective bidders should obtain the full set from the National Procurement Commission. Here are a few parts of the package.
NPC received twenty bids: 15 from Chinese Companies, two Portuguese, two Indonesian and one Australian. They were still being evaluated in October.
At the same time, the Government is conducting a second tender for a consultant to supervise the construction of this first highway segment. The NPC invited proposals on 15 May 2013, and they are due by the Fourth of July. Download the Request for Proposals here (1.4 MB, reduced resolution from 3.4 MB original.) After a pre-proposal conference on 27 June, NPC issued an addendum to the RfP, followed by additional clarifications a few days later. They issued a second addendum on 4 July 2013.
Bids were opened in early October and are being evaluated, and we were told in mid-October to expect announcement of the result by the end of the month.
However, appropriations for the highway were zeroed out in 2014 State Budget proposed that same month, and the tender was delayed, although TimorGAP still plans to start construction in May 2014 (see above).
Current Status: All tendering process concluded for both Contractor and Consultant
According to TimorGAP's 2014 Annual Report, the Council of Ministers decided that China Overseas Engineering Group Co. (COVEC) in joint venture with China Railway First Group Co. (CRFG) "would be contacted (sic) for the phase one of the highway project," from Suai to Fatucai/Mola. A year later, TimorGAP's 2015 Annual Report (from which the picture at right was taken) confirmed that the contract had been awarded.
The 2015 State Budget allocates $12.5 million for the highway in 2015, $5 million more in 2016 and nothing after that. However, funding was greatly increased in the 2016 State Budget, with the following anticipated expenditures and loans:
However, in TimorGAP's presentation to Parliament on 18 November 2015, they planned to spend $50 million on the first phase of the highway during 2016.
The supervision consultancy tender for the first phase was re-issued in November 2015, and the National Procurement Commission awarded a $395,606 contract to Katahira & Engineers International two weeks later.
The contract to construct the first phase of the highway has not publicly announced or posted to the Government's Transparency Portal. It was awarded to China Overseas Engineering Group Co. (COVEC) in joint venture with China Railway First Group Co. (CRFG) in late 2015, although TimorGAP's 2014 Annual Report and other documents have mentioned this companies as the assumed winner of contract since at least early 2014. The contract amount is still undisclosed.
In March 2016, the technical staff National Environment Directorate drafted a letter telling the Ministry of Public Works to halt construction work on the highway as it has not received the legally required environmental license, but we do not know if the letter was officially approved or delivered. Unfortunately, the highway is one of many large projects under construction in violation of the environmental licensing law, and on 31 May La'o Hamutuk asked to the Provedor for Human Rights and Justice to investigate this pervasive governance failure.
According to the Budget Execution Portal accessed on 20 June 2016, executed spending on the highway during 2015 was $12 million, while $57 million more had already been spent in 2016, nearly three times the $20 million appropriated in the 2016 budget. (Under the rules of the new Infrastructure Fund, an Administrative Council consisting of the Ministers of Planning, Public Works, and Finance can shift money among projects within the Fund's budget.)
In 2015, Timor-Leste signed contracts to build the Suai Supply Base and to design the Beacu LNG Plant (although the $719 million SSB contract was rejected by the Audit Court and eventually abandoned by the contract winner). La'o Hamutuk invited TimorGAP President Francisco Monteiro to discuss Tasi Mane at a public meeting on 22 October 2015, which attracted about 150 people and provoked a lively discussion. Although TimorGAP did not want us to put their presentation online, La'o Hamutuk's is available in English (also PDF) or Tetum (also PDF).
In October, the Government proposed its budget for 2016 to Parliament, including much higher planned spending on the Tasi Mane project. The budget documents project Infrastructure Fund spending through 2020, but still do not include the most expensive parts of Tasi Mane -- detailed design and construction of the Betano refinery, Beaçu LNG plant, Sunrise Pipeline, and 120 km of the highway. Nevertheless, the Budget lists expenditures totaling over $1.4 billion during 2016-2020 (of which $418 million will be borrowed), not including about $70 million which has already been spent. Spending in 2016 will be $96.6 million, including $25m in loans. As shown on the graph at right, the total project cost has increased 54% since the year before, which had already 150% since 2013. Where will it end?
Meabh Cryan's paper Dispossession and Impoverishment in Timor-Leste: Potential Impacts of the Suai Supply Base describes some of the impacts the project has already had on local communities, which were reported globally by BBC Television (the video has more than the article) in June 2016.
The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)