La’o Hamutuk

Bulletin  |  Surat Popular  |  Topic index  |  Reports & Announcements  |  Updates
Reference  |   Presentations  |  Mission Statement  |  LH Blog  |  Search  |  Home

Opinion articles by Francisco da Costa Monteiro

Advisor, Natural Resource Division
Economy and Planning Advisory Unit, Office of the President
Democratic Republic of Timor-Leste, Caicoli, Dili
Francisco@easttimor.minihub.org    Mobile: +670 7249085

Contents

Greater Sunrise International Unitisation Agreement (IUA)
Document Analysis

1 April 2004

  • Greater Sunrise International Unitisation Agreement (IUA) is a document that will give effect to the exploitation and development of Greater Sunrise as one single entity for development purposes.

  • The Preamble of the IUA, recognizes that Timor-Leste and Australia have made claims and yet to delimited their maritime boundaries, including in an area of Timor Sea where Greater Sunrise lies. But Australia is continuing to claim that the area outside the Joint Petroleum Development Area is solely in their jurisdiction.

  • The apportionments of the field are divided into two different jurisdictions, namely 20.1% in the Joint Petroleum Development Area (JPDA) jurisdiction, and 79.9% in Australia Jurisdiction (Article 7).

  • The distribution of the revenues and expenditures receipts and taxation resources will follow this apportionment (Article 10 and Article 11). This means that by ratifying the IUA the Greater Sunrise will be developed as single entity unit but Timor-Leste will only have jurisdiction over 18.99%, meaning also that Timor-Leste will get only 18.99% of the revenues.

  • The applications of laws, the Timor Sea Treaty will be used to govern the petroleum activities in the JPDA, and Australian law will be applied to the petroleum activities attributed to Australia (outside the JPDA) (Article 4).

  • Article 18, gives employment preferences to nationals of Timor-Leste and Australia. As one can expect Timor-Leste nationals has not been qualified enough, so the employments opportunities will goes more to Australia.

  • Article 2, states without prejudicing to the future maritime boundary delimitation. This statement will almost exist in every temporary agreement or interim agreement.

  • Under the IUA, the body that will administer and regulate the petroleum activity in the Greater Sunrise is called the Regulatory Authorities, which is the Timor Sea Designated Authority and Australian Ministry/Directorate of Petroleum. The authority of this Regulatory Authority, consequently, must reflect the apportionment of the field, which is 20.1% authority to Timor Sea Designated Authority, and 79.9% authority to Australian Ministry/Directorate of Petroleum (Article 9 paragraph 1). As Timor-Leste only has 90% of the Designated Authority, it has 18.99% of the authority in the Regulatory Authority. The 81.01% of authority belong to Australia.

  • Sunrise Commission will be established under IUA (Article 9 paragraph 2). The Sunrise commission will consist of three members, 2 from Australia and 1 from Timor-Leste (Article 9 paragraph 8). The commission will give recommendation to the Regulatory Authority to approve and disapprove a Development Plan (Article 9 paragraph 4). Timor-Leste will be in a very weak position to say on the Development Plan, such as to say where the pipeline and LNG-plant is to go, and so.

  •  Other Articles are general and it serves equally the interest of both sides.

Process of Timor Sea Occupation
April 2004

1. Withdrawal from ICJ, UNCLOS

Australia withdrew from UNCLOS and ICJ dispute resolution on 22 March 2002, after filing the appropriate documents with the UN in New York on 21 March.  On the 25 March Attorney-General, the Hon. Daryl Williams and the Minister for Foreign Affairs Alexander Downer announced that Australia would no longer accept the rulings of the International Court of Justice or the 1982 United Nations Convention on the Law of the Sea (UNCLOS). 

Comments: Australia withdrawal from the international dispute resolution bodies, including the International Court of Justice, two months before Timor-Leste’s independence suggests that Australia does not have confidence in its legal position. Australia by withdrawing from the jurisdiction of the ICJ can be seen as a move to consolidate its illegal occupation.  

2. Illegal Occupation 2004

In the 2004 Australian area release for oil exploration two areas are in the disputed areas (Red Zones). One of the areas NT04-1 is adjacent to the Greater Sunrise field. A second block, AC04-1, located in the western part of the Timor Sea.  

Violation: IUA Preamble- Noting that Timor-Leste and Australia have, at the date of this agreement, made maritime claims, and not yet delimited their maritime boundaries, including in an area of the Timor Sea where Greater Sunrise lies.

Comments: This unilateral action of issuing exploration licenses in the disputed areas is inconsistent with the spirit and the letter of the greater Sunrise International Unitisation Agreement. International law requires that Australia exercise restraint in disputed maritime areas. 

3. Illegal Occupation 2003

In the 2003 Australian area release for oil exploration, one area was partly in the disputed area (Red Zones). Release Area NT03-3.  On the 23 February 2004 Australian Government issued permit number NT/P68 for this area. 

Violation: IUA Preamble-Noting that Timor-Leste and Australia have, at the date of this agreement, made maritime claims, and not yet delimited their maritime boundaries, including in an area of the Timor Sea where Greater Sunrise lies.

Comments: This unilateral action of issuing exploration licensees in the disputed areas is inconsistent with the spirit and the letter of the greater Sunrise International Unitisation Agreement. International law requires that Australia exercise restraint in disputed maritime areas. 

4. Illegal Occupation 2002

In the 2002 Australian area release for oil exploration one area was in the disputed areas (Red Zones). Release Area NT02-1.  On the 22 April 2003 Australian Government awarded permit number NT/P65 for this area. It was given a consortium comprising National Oil and Gas, Australian Natural Gas and Nations Natural Gas.

Violation: IUA Preamble-Noting that Timor-Leste and Australia have, at the date of this agreement, made maritime claims, and not yet delimited their maritime boundaries, including in an area of the Timor Sea where Greater Sunrise lies.

Comments: This permit is well within the disputed area and adjacent to Greater Sunrise field, this area would belong to Timor-Leste, with a fair legal boundary settlement. 

This unilateral action of issuing exploration licensees in the disputed areas is inconsistent with the spirit and the letter of the greater Sunrise International Unitisation Agreement. International law requires that Australia exercise restraint in disputed maritime areas.

5. Illegal Occupation 2001

In the 2001 Australian area release for oil exploration one area was in the disputed areas (Red Zones). Area NT01-3. On 20 September 2002 Australia awarded permit number NT/P62 for this area. It was given to National Oil&Gas, Australia Natural Gas and Nations Natural Gas. 

Violation: IUA Preamble-Noting that Timor-Leste and Australia have, at the date of this agreement, made maritime claims, and not yet delimited their maritime boundaries, including in an area of the Timor Sea where Greater Sunrise lies.

Comments: Although only a corner of this area intrudes into Timor-Leste’s disputed territory. It is still an act of illegal occupation. 

This unilateral action of issuing exploration licensees in the disputed areas is inconsistent with the spirit and the letter of the greater Sunrise International Unitisation Agreement. International law requires that Australia exercise restraint in disputed maritime areas. 

6. Illegal Occupation and Theft

Australia continues with the exploitation of Laminaria-Carolina and Buffalo oil fields. These fields are in the disputed areas.  Australia has also gained US$1.5 billion in tax revenue from above fields.

Violation: IUA Preamble-Noting that Timor-Leste and Australia have, at the date of this agreement, made maritime claims, and not yet delimited their maritime boundaries, including in an area of the Timor Sea where Greater Sunrise lies.

Comments: Australia continues to derive revenues from disputed areas. International law requires that Australia exercise restraint in disputed maritime areas.  Australia’s exploitation of Timor Sea resources without the consent of Timor-Leste’s is illegal occupation of territory and theft of its resources.

7. Pressure Tactics

Australia delayed ratifying the Timor Sea Treaty to force East Timor to sign the Sunrise IUA. Although Dili had ratified the Treaty in 17 December 2002, the Australian government refused to ratify, holding the up the process and threatening the Bayu-Undan project. Bayu Undan operator ConocoPhillips said that the Japanese customers for Bayu-Undan gas could cancel their contracts if the Treaty were not ratified by both governments before 11 March 2002. On the 5 March 2002, East Timor Government, fearful of losing Bayu Undan, agreed to sign the IUA, and the Australian Government submitted the Timor Sea Treaty to Parliament. The following day, Alexander Downer returned to Dili to sign the IUA; on the same day, Parliament in Canberra ratified the Timor Sea Treaty.

Comments: With clear knowledge of the terrible economic condition faced by Timor-Leste, the poorest nation in SE Asia. Australia pressures Timor to sign an agreement giving away 57% of its hydrocarbon wealth.

8. Ramming IUA through the Australian Parliament

On 29 March 2004 the Australian Parliament ratified the IUA, it pushed through the Australian Parliament in a manner, which was heavily criticized by some members of the Australian Parliament and the Australia public. 

Comments: This action demonstrates the Australian Government’s cutting corners to speed up a process of ratification of the IUA and at the same time stalling the maritime negotiations.

9. Misinformation

Australia continues to assert this erroneous geological fact that the “Timor Trough” marks the edge of its continental shelf natural prolongation. 

Violation: The United Nations Convention on the Law of the Sea (UNCLOS) recognized State’s sovereign rights over the resources up to the natural prolongation of their continental shelf, provided such limits do not infringe upon other claims of adjacent or opposite coastal state.

Comments: This outdated “natural prolongation continental shelf principle” is technically incorrect, as there is strong scientific evidence to suggest that Timor-Leste and Australia are on the same continental shelf plate.  Legally, this principal has also been superseded because once the distance of the sea between two states is less than 400 nautical miles, which is the case of Australia-Timor-Leste, this principle no longer applies. The continuing use wrong geological facts and of superseded legal instruments is not a measure of good faith.

10. Stalling Negotiations

On the 12 November 2003, at the preliminary maritime negotiations talks in Darwin Timor-Leste proposed monthly meetings aimed at resolving this dispute expeditiously, Australia said that it did not have the personnel and resources to meet so often. It was only able to meet twice a year.

Violation: IUA Preamble- Recalling further the Memorandum of Understanding between the Government of the Democratic Republic of Timor-Leste and the Government of Australia of 20 may 2002 in which they agreed to work expeditiously and in good faith to conclude a unitisation agreement for Greater Sunrise

Comments: Attempts to delay maritime negotiations based on lack of resources is not indicative of an attempt to resolve the Unitization Agreement expeditiously. Recalling that during the Sunrise IUA negotiations in early 2003, which Australia wanted to conclude quickly, the two sides had met monthly.

11. Bullying

On 27 November 2002 in the Palace of the Government Dili during one IUA negotiating session in, Australian Foreign Minister Alexander Downer lectured Prime Minister Mari Alkatiri: “We won’t agree to a JPDA for Greater Sunrise. We will do you due respect to listen to your proposal….I think your Western advisors give you poor advise that public opinion supports East Timor in Australia. We are very tough. We will not care if you give information to the Media. Let me give you a tutorial in politics not a chance.”

Comments: The use of strong verbal language and display of arrogance is not conductive for a working environment to conclude an unitisation agreement for Greater Sunrise expeditiously and in good faith. 

12. Other Acts

In the last 30 years we can recall other unfriendly  acts; The 1989 Timor Gap Treaty, the de jure recognition of the occupation, the support of the 1975 invasion. 

 

 

Timor Trough
A Foreland Basin or Foredeep
Not a subduction nor the limit of Australian continent

6 April 2004

Overview

Timor Trough is a long elongated moderately deep basin running along the southern water of Timor Island in the Timor Sea. The axis of this trough ranges in depth from 1,500 to 3,000 meters.

The north-western slope of Timor Trough is rocky and highly irregular, with its regular gradient of approximately 3°, and locally slopes up to 10° or more.[1] The floor in the deepest part of the trough is variable in width and shape. Some parts of the trough narrow to a V-shape. The width varies from 1.85 km - 13 km. The variability in slope, depth, and morphology, along the axis of the Timor Trough suggests that the trough is composed of several sub-basins, which are now largely filled. Unlike the north-western slope, however, the south-eastern slopes of the Timor Trough are generally smooth with only occasional small hills and valleys. The slope varies from 0.3° to 3°.

The sediments of the Timor Sea are generally thin, except on the southern slope and bottom of the Timor Trough. The coarser fractions are predominantly calcareous, but the fine silt and clay are of terrigenous origin and are derived from Australian rivers and from the island of Timor along the northern margin of the Timor Trough.

Timor Trough and Its Origin

Timor Trough is a foreland basin or foredeep [2]. The history of its formation relates back to the formation of the Timor Island as a whole. Timor Trough was formed as the Australian continental shelf buckled down/down-wrapped when the collision occurred in the Mid-Pliocene[3] between the Australian Continental Plate and the Banda Arc Plate. This means that the trench in Timor Trough is not a subduction zone where an active seismicity can be expected and or where a limit of the Australian continent, can be delineated but rather a low lying topography of Australian continental margin where sediments are accumulating. In this theory the island to the north of this trench (the Timor Island) is a fold-thrust mountain belt, which is the case in the Timor Island geological history.[4]

Seismicity in the Region

The seismicity in the Timor Sea, including the Timor Trough, has been cited by many experts as relatively quiet and imposes very low risks.[5] Oil companies operating for decades in the area have not made any significant complaints on the seismicity of the Timor Sea. Another indirect fact that suggests that Timor and the Timor Sea region seismically pose low risks is the Global Positioning System (GPS) Survey conducted within Banda Arc in 1996, which indicate that the island of Timor, and Wetar, Flores, are moving northwards with the same relative velocity vector as the Australian continental plate.[6] This indicates that the Timor Island has been locked-up onto the continuing northward moving of the Australian continental plate. In this sense, it effectively reduces the causes of earthquakes that might occur due to collision between the Australian plate and the island.

Implications

  1. Australia has been using the argument of “natural prolongation of its continental shelf” to claim areas in the Timor Sea to as far as the down-going of its continental shelf in the Timor Trough. The United Nations Convention on the Law of the Sea (UNCLOS) recognizes a State’s sovereign rights over the resources up to the natural prolongation of their continental shelf, provided that such limits do not infringe upon other claims of adjacent or opposite coastal state.[7] The continental shelf in the Convention is defined as the area of the seabed, which because of its geological characteristics, is considered the natural prolongation of the continental, or land mass, beneath the oceans or seas.

Based on the geological and geophysical evidence of the geology of Timor as described by many authors, e.g., Audley-Charles (1968), Grady & Berry (1977), Chamalaun (1978), Charlton (2000, 2002), da Costa Monteiro (2003 a & b), and others, indicate that the basement rocks found in Timor-Leste are similar in facies and sediments to the rocks found in the Australian Northwestern Continental margin, i.e., Timor Sea. The geophysical studies, e.g. gravity and magnetic and paleomagnetic evidence also suggest that the Australian continental crust lies beneath the Timor Trough and extends as much as the north-coast of Timor Island.[8] Therefore, technically speaking, the limit of natural prolongation for the Australian continent should, as a matter of fact, be in the north-coast of the Timor Island, and that the whole Timor Island should be claimed as part of Australian natural prolongation if Australia is to be consistent with its claim. However, as Timor Leste is an independent country, as with similar situations in other parts of the world, the opposite coastal state can not make such a claim. In this regard, technically, it is incorrect for Australia to stick to the claim that Timor Trough is the limit of natural prolongation of the Australian continental shelf. On the other hand, the natural prolongation of the continent, may only apply when the two coastal states are situated in a sea width more than 400 nautical miles. The sea between Timor-Leste’s southern coast and the Australian northern coast is less than 400 nautical miles. The UNCLOS Mid-line principle has legally superseded the natural prolongation convention, thus legally the natural prolongation of continent claim is no longer valid.

  1. The companies have been using the argument of the deep and active seismicity in the Timor Trough to justify their statement that “it is technically impossible to lay pipelines across the Timor Trough…and therefore LNG-Plant to Timor-Leste is not viable”. This argument is not only outdated due to the recent advances in the technology of deepwater pipelines that have made the Blue Stream Deepwater Project (2,150 m) of Russia-Turkey-pipeline possible but also it undermines the fact that the Timor Trough, morphologically is more friendly than the Black Sea where the Blue Stream pipelines cross. In the Black Sea the slope of the trench on the Russian side reaches 30°, while in Timor Trough the maximum slope is about 10° in the north-western side. Thus, the slope instability in the Black Sea is higher and poses more geohazard risks than in the Timor Trough. Also, as the Black Sea is a stagnant basin filled with water, this has caused an increase in the H2S content which is very corrosive to the pipeline. This is not the case in open water of Timor Sea/Timor Trough. Another fact is that Turkey lies in the very active tectonic region in the world. Earthquakes of more than 6 Richter Scale occur every now and then. By comparison, the seismicity in Timor Trough and in Timor Sea in general is relatively quiet and a very low risk.

Recommendations

  1. Timor-Leste should argue against any statement that uses the Timor Trough as the limit for its natural prolongation of continent and the basis for maritime claim.
  2. Timor-Leste should resist the argument used by the companies and maybe some governments that Timor Trough is too risky and technically impossible for laying pipelines across.

Black dots indicate earthquake hypocenters. Note. Sections N5, N6, N7 across Timor Trough indicate no earthquake hypocenters directly below it.

Diagrams taken from McCaffrey (1989).

Diagramatic representation of Timor Island, Timor Trough and Australia Continent.

Note. The continuation of Australian “natural prolongation” of its continent to the north-coast of Timor-Leste. Timor Trough is not a subduction zone where Australian continent terminates but rather a foreland basin/foredeep.

Diagram is taken from Fig.8 of Audley-Charles (1986).

Notes

[1] Van Andel & Veevers, 1967. Morphology and Sediments of the Timor Sea. Bureau of Mineral Resources, Geology & Geophysics Bulletin No. 83. Canberra, Australia.

[2] Various sources e.g. : Shanmugam & Lash, 1982. Analogous tectonic evolution of the Ordovician foredeeps, southern and central Appalachian: Geology. V. 10, p. 562-566; Audley-Charles, 1983. Comments On Shanmugam & Lash, 1982 paper; Audley-Charles, 1986. Rates of Neogene and Quaternary tectonic movements in the Southern Banda Arc based on micropaleontology. Journal of the Geological Society of London. V. 143.pp. 161-175; Tandon, et al., 1997. Rigidity of the Australian Continental Lithosphere Across the Banda Orogen, Indonesia. Fall AGU abstract (7). www.geol.lsu.edu/juan/Abstract/Abstracts_Timor.html; Lorenzo, et al., 1997. Neogene Flexural Reactivation in a Modern Foreland Basin, Timor Sea, N.W. Shelf, Australia. Fall AGU abstract (6). www.geol.lsu.edu/juan/Abstract/Abstracts_Timor.html; Lorenzo, et al., 1996. Flexural Extension and the Absence of Flexural Uplift – Timor Sea, North West Shelf, Australia. Fall AGU abstract. www.geol.lsu.edu/juan/Abstract/Abstracts_Timor.html; Tandon, et al., 1995. Continental Flexural Extension in Collisional Margins: Timor Sea Area, North West Shelf of Australia, and Offshore Southwestern Taiwan. www.geol.lsu.edu/juan/Abstract/Abstracts_Timor.html;

[3] Carter, et al., 1976. Stratigraphical analysis of island arc-continental margin collision in eastern Indonesia. Journal of the Geological Society, London, 332, p. 179-198.

[4] Price & Audley-Charles,  1987. Tectonic collision processes after plate rupture. Tectonophysics, vol. 140, p. 121-129; Norvick, 1979. The tectonic history of the Banda Arcs, Eastern Indonesia: a review. Journal of Geological Society of London, vol. 136, p. 519-527.

[5] Dr Tim Charlton, quoted in the Submission to the Joint Standing Committee on Treaties, 2002; McCaffrey, R., 1989. Seismological Constraints and Speculations on Banda Arc Tectonics. Netherlands Journal of Sea Research 24 (2/3): 141-152; Cardwell & Isack, 1978. Geometry of the subducted lithosphere beneath the Banda Sea in eastern Indonesia from seismicity and fault plane solutions. Journal of Geophysics Research 87, p. 2825-2838

[6] Snyder, et al., 1996. A dual double vergent orogen in the Banda Arc continent-arc collision zone as observed on deep seismic reflection profiles. Tectonics, v. 15/1, p. 34-53.

[7] Commission on limits of Continental Shelf Adopts Guidelines; addresses rules of procedure, confidentiality of information. http://www.un.org/News/Press/docs/1998/19980914.sea1681.html

[8] Beck, 1972. The oceans, the new frontier in exploration. Australia Petroleum Exploration association Journal, 12 (2), p. 7-28; Chamalaun, et al., 1976. The Bouguer gravity field and crustal structure of eastern Timor. Tectonophysics, 30, p. 241-259; Cardwell & Isack, 1978. Geometry of the subducted lithosphere beneath the Banda Sea in eastern Indonesia from seismicity and fault plane solutions. Journal of Geophysics Research 87, p. 2825-2838; Curray, et al., 1977. Seismic Refraction and Reflection Studies of Crustal Structure of the Eastern Sunda and Western Banda Arcs. Journal of Geophysical Research, v. 82/17, p. 2479-2489.

Comments on Prof. Gillian Triggs’ interview with The Australian Newspaper

20 April 2004

Prof. Triggs’ is the Director of the University of Melbourne’s Institute for Comparative and International Law.

Interview was reported by Nigel Wilson on April 20, 2004 titled “The line share”

  1. Triggs said: “Howard Government’s case was strong and maintained that the arguments put up by East Timor contained a significant number of myths”.

Comments: It is not clear which arguments Prof. Triggs is referring to as myths, but it has certainly been clear that the arguments, which the Howard Government has been using to support its claims (the natural prolongation of its continental shelf) are not valid and are outdated both legally and technically. Therefore, by using these arguments in public meetings and in Senate debates, the Howard Government and their supporters, such as Prof. Triggs, are not telling ‘myths’ but rather telling LIES.

  1. Triggs said: “international tribunals have found that it is not the job of international law to ‘refashion nature’. Nor does equity necessarily require equality”.

Comments: Again it is not clear which international tribunal she is referring to, but utilizing phrases such as “refashion the nature” is vague and weak as a basis for argument. It seems surprising, and I might add, disappointing that an academic of her caliber, could not come up with a more substantive argument.  This is clearly indicative that Prof. Triggs is simply relying on her academic authority to bully and deceive the general public. If Australia is not afraid of losing the case why did it withdraw from the jurisdictions of the international tribunals? Does the professor mean the rule of Australia precedes the rule of international law?

The United Nations Convention on the Law of the Sea (UNCLOS) recognizes a State’s sovereign rights over the resources up to the natural prolongation of their continental shelf, provided that such limits do not infringe upon other claims of adjacent or opposite coastal state. The coastal state should only apply its continental natural prolongation claim after applying the 200 nautical miles EEZ, and ensuring that it faces no obstruction (claims) from other coastal states. In the Timor-Leste-Australian case, there is indeed some overlapping claims even only when using the 200 nautical miles of Australian EEZ jurisdiction. The sea between the two countries is less than 400 nautical miles apart. Therefore, there are some overlapping claims in the area of the Timor Sea. International laws suggest these contentious claims should be negotiated by the parties involved but, in the event that no satisfactory outcome can be reached, the case should then be referred to the international tribunals for adjudication. Does this not make any sense to the logical professor Triggs?

  1. Triggs said” [Peter] Galbraith told East Timorese what they wanted to hear but he is on thin ice in citing international legal authorities to back the claim for median boundary. International law does not require a median line where states do not have a continental shelf in common. As a matter of fact of geology, Australia is on a continental shelf; East Timor is not”.

Comments: Again Professor Triggs is using her academic authority to make unsubstantiated arguments, to the extent of speaking confidently on a subject which is not her field. She is an international law expert, not a geologist!  According to many geologists who worked in Timor-Leste and the surrounding areas, the Timor Island is part of the Australian continental margin. The rocks characterized in the Timor Island based on geological works and geophysical works have strongly suggested that the two countries sit on the same continental plate. The Timor Trough is not the subduction zone, which is the supposed limit of the Australian ‘natural prolongation’ but rather the down wrapping/buckling down of the Australian continental margin, given that the leading edge of this continent collided with the Banda Arc during the Mid-Pliocene collision. Timor Trough is therefore a foreland basin. The characteristic of continental rocks have been found all the way to the north-coast of Timor Island by geological, gravity and magnetic surveys and modeling. Perhaps Professor Triggs should have researched more thoroughly before giving this interview, and thereby avoid putting forth unfounded statements.

Greater Sunrise International Unitization Agreement (IUA)
WOODSIDE & Australian Government PRESSURE TACTICS!!!

21 April 2004

Woodside Petroleum is threatening to stop the development of the Greater Sunrise if the Parliament of Timor-Leste is not ratifying the International Unitization Agreement. Woodside’s spokesperson said that the joint ventures need IUA to secure the fiscal and legal certainty for further commitment in investments.

This move can be anticipated as it is part of the “pressure tactics” developed together by Woodside (an Australian company) and the Government of Australia to pressure Timor-Leste. The move has the same pattern used by Phillips Petroleum (Conoco-Phillips) leading-up to the signing of Timor Sea Arrangement in July 2001 and the ratification of Timor Sea Treaty and signing of IUA in March 2003. This classic threat to “pull-out” using the necessity of fiscal and legal certainty from IUA as the reason is inappropriate. It is inappropriate because the real fiscal and legal certainty that they require is in fact not is coming from IUA but has to be coming from the Permanent Maritime Boundary delimitation, which is now being reluctantly drawn by Australian Government.

Why doesn’t Woodside require/pressure Australian Government to quickly finalize the negotiation with Timor-Leste on Permanent Maritime Boundary? Or do they just want to join with Australian Government to once again bullying Timor-Leste over its gas resource?

The threat can also be seen as a way from Woodside Petroleum to avoid having to be serious in looking into and consider thoroughly Timor-Leste as a possible gas processing (LNG-plant) destination. Timor-Leste has requested Woodside to do a feasibility study on this possibility to add to the other two existing destination, which were either a Floating LNG-plant in the sea or another LNG-plant in Darwin. By pressuring Timor-Leste to ratify the IUA before the Permanent Maritime Boundary is delimited, Woodside is hoping that they can get away from having to bring the gas onshore and build a gas processing in Timor-Leste. In the IUA Timor-Leste will have very little power to say in Greater Sunrise Development Plan. It is part of Woodside’s (Australian company) interest and Australian Government’s interest to take the gas to Darwin and build a LNG-plant in there because Northern Territory has been projected to become a new gas hub in the region.

For a company such as Woodside that want to work with Timor-Leste as partners in exploring and exploiting its oil and gas resources, this tactical pressures are very selfish and do not show a suppose good relation that they should have built.

Should Timor-Leste Ratify IUA?

International Unitization Agreement (IUA) is a document that will give effect the exploitation and development of the Greater Sunrise gas field, the biggest reserve in the area, as a single entity for development purposes but put only 20.1% of this field into the Joint Petroleum Development Area (JPDA) and the rest is attributed to Australia (79.9%). The whole field lies in a disputed area. This apportionment is also reflected in the revenue sharing and the Regulatory Authority and power sharing over the field. Therefore, as a document, IUA will prejudice a lot of Timor-Leste’s interest.

Economically, when ratifying the IUA Timor-Leste will lose the potential 8-9 Billion US dollar in government revenues, also it will loses the power to require the company to bring the pipeline and LNG-plant to Timor-Leste that will bring at least 5 Billion US direct capital investment and associated economical multiplier effect such as employment and creating a good image for subsequent investments. Timor-Leste is set to only receive 1.4 Billion US dollar at maximum in form of revenue, and losing the downstream benefits above if it ratifies the IUA.

Politically, ratifying IUA will set a bad precedent for Timor-Leste in the negotiations on maritime boundary particularly on the issue of changing the current east and west lateral boundaries of JPDA. On the other hand, ratifying IUA will enforce Australia’s position to loc-up the current laterals agreed with Indonesia. This is because by ratifying IUA, Timor-Leste is indirectly justified that Australia owns the area to the east of the JPDA because it agrees that 79.9% of Greater Sunrise, which is in the east of JPDA (area of dispute), be attributed to Australia.

So, for the purpose of National Interest, as it has been crying out by civil society in many occasions, and for the purpose of strengthening the government’s position in the negotiations, the International Unitization Agreement (IUA) SHOULD NOT BE RATIFIED.

Not ratify IUA is, in fact, will bring so many advantages for Timor-Leste, because:

  1. It will bring an immediate Attention from International community to Timor-Leste and Timor Sea in general. IUA is an international level agreement/bilateral, so if one party does not ratify it, international community will be curious to know why. This kind of attention is what Timor-Leste really need at this moment to expose internationally the UNFAIRNESS in the Timor-Sea by Australian Government.

  2. It will send a Strong Message to Australian Government and its supporting politicians to stop issuing unilateral licensing and explorations in the area of dispute. Timor-Leste is not only declare those areas as disputed areas but believe Firmly that it belongs to it under International Law therefore does not agree on a document that allows a field in the area to be exploited by Australia.

  3. It will also send a Strong Message to the Companies i.e. Woodside who is also at this moment still exploiting the Laminaria-Carolina and Buffalo oilfields in the disputed area unilaterally, that working in the area of dispute without prior consent or agreement by Timor-Leste is very risk.

  4. It will also tell Woodside and its joint ventures to understand that the real fiscal and legal Certainty that they require is not from this IUA but from a Permanent Maritime Boundary of the two countries is delineated. Therefore, they should have rather pressure/push for a quick resolution on the permanent maritime boundary. IUA is just a temporary agreement therefore the fiscal and legal certainty will also be temporary, which is not good for big investments.

After all, Timor-Leste is not in a great hurry to develop the Greater Sunrise. Timor-Leste needs time to prepare its institutions, finalizing its legislations, reviews the Productions Sharing Contracts Terms, and capacitate its human resources and management to really properly respond to this high-tech nature industry. We respect Woodside for its presence in Greater Sunrise, although their acts in Laminaria-Carolina and Buffalo are very bad, but if they start doing threats of stopping the exploitation let them stop it. Timor-Leste will lose nothing! In fact, with that big reserve (2 to 3 times Bayu Undan reserve) confirmed/proven, if Woodside leave the Greater Sunrise, many companies will certainly come and apply for exploitation in the field straightaway. Moreover, if the Permanent Maritime Boundary is delimited, this will give the real fiscal and legal Certainty.

Timor-Leste needs time. Stay away from your “Pressure Tactics” or else you can GO! Be good partners or stay away?!

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua D. Alberto Ricardo, 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