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Friday, February 25, 2005. The Age.

Timor oil talks to resume next month

Australia will set aside for a century a push for permanent sea boundaries with East Timor as part of a solution to a multi-billion dollar dispute over oil and gas deposits in the Timor Sea.

East Timor and Australia have been in talks for the past 11 months over where to draw the boundary in the joint petroleum development area (JPDA).

Under an interim deal signed in May 2002, East Timor is entitled to 90 per cent of royalties from oil and gas developments in the JPDA, earning it an estimated $US8 billion ($A10.19 billion) from the Bayu-Undan field.

The agreement also included support for the new $9 billion Greater Sunrise field. But while the Australian parliament has ratified that part of the deal, the East Timorese parliament has yet to follow suit.

The Sunrise agreement gives Australia 79.9 per cent of royalties, because most of the project's area is located in Australian jurisdiction and only a small area lies within the JPDA.

But Woodside Petroleum, the operator of the Greater Sunrise project, has suspended work after spending $200 million on exploration and project development until the East Timor government agrees to a legal and fiscal framework.

Timor wants the permanent boundary of the JPDA mid-way between the two countries putting most of the Timor Sea's resources within it.

But Australia maintains it is an ambit claim and the boundary should be at the edge of the continental shelf, much closer to Timor.

The talks broke down in October, but are set to resume in Canberra on March 7 after the Timorese officials agreed to discuss a creative solution.

A senior DFAT official said Australia's creative solution involved four issues: setting aside permanent boundary talks, legal certainty for the Greater Sunrise project, putting no onerous conditions on the Sunrise project and ensuring no adverse impact on either country's legal claims in the area.

"Our position is that permanent boundaries should be put off for some considerable time," the official told reporters.

"This has been talked about as the Hong Kong solution and I think the Hong Kong years were 99."

He said he was optimistic a solution could be reached that was acceptable to both sides.

© 2005 AAP