Timor-Leste Petroleum Fund Operations
July 2005 - May 2008
Public consultation on Timor-Leste's Petroleum Fund began in October 2004, and continued with hearings and passage of the Petroleum Fund Act on 20 June 2005. In July, the Minister for Planning and Finance and the Banking & Payments Authority signed an Operational Management Agreement on the Petroleum Fund.
The government announced the establishment of the Petroleum Fund on 22 September 2005, with $250 million in petroleum revenues received previously.
In February 2006, NGOs elected their representatives to the Petroleum Fund Consultative Council. The PFCC did not become operational until the end of 2006. Its members, chosen according to the Petroleum Fund Act, include Former Prime Minister Mari Alkatiri, NGO representatives Thomas Freitas (Luta Hamutuk) and Maria Dias (Rede Feto), Parliament's nominees Antero Benedito da Silva and Nuno Rodrigues, Presidential appointee Francisco da Costa Monteiro, Aurelio Guterres (nominated by Parliamentary President Lu-Olu), business sector representative Oscar Lima and religious institutions representative Reverend Francisco Vasconcelos.
On 18 April 2006, the Petroleum Fund Investment Advisory Board adopted its Rules of Procedure. The IAB is composed of BPA Director Abraão Vasconselos, Cristiano Gusmão, Manuel Monteiro, Sigurd Klakeg and Torres Trovik.
The lead article in La'o Hamutuk's March 2007 Bulletin is about the Petroleum Fund, including a glossary and a comparison with Norway's Fund.
In December 2007, Timor-Leste's Petroleum Fund balance reached two billion dollars. In late 2006, the Bayu-Undan project moved into a higher "profit oil" tax rate because of the profitability of the project, which is why TSDA receipts increased significantly beginning in the first quarter of 2007. The first withdrawal (transfer to the Government's operating budget) from the fund ($120,000,000) was made on 21 March 2007, and withdrawals totaling $140.07 million were made in May and June. The AMP Government, following the Transitional Budget, withdrew an additional $40 million in December, leaving a balance of US$2,086,157,085 at the end of 2007.
Total withdrawals for the July 2006-June 2007 fiscal year were $260.07 million, $37,000 more than was budgeted in August 2006 for the fiscal year. However, most of this money has not been spent, but is held in banks and investments by the Government (as distinct from the Petroleum Fund). According to the quarterly Balance Sheets from the BPA (available from www.bancocentral.tl/en/balancesheet.asp), government assets held by the BPA (not including the Petroleum Fund) increased from $56.1 million at the end of December 2006 to $248.0 million at the end of June 2007.
During October 2007, the Parliament of Timor-Leste passed a $117 million transitional budget for the last six months of calendar 2007, including a $40 million transfer from the Petroleum Fund. The Government's Treasury account contained $248 million at the start of the six-month period ($118.8 of which was unspent obligations from previous years) which could have funded the entire budget without Petroleum Fund money. The Petroleum Fund Act requires an audited estimate of sustainable income and prior consultation with the Petroleum Fund Consultative Council prior to passing a budget, but this was not done. The PFCC wrote a letter to Parliament objecting to their exclusion from the process.
As planned, $40 million was transferred from the Petroleum Fund on 18 December 2007. At the end of 2007, the BPA still held $189 million for the government in its Treasury Account, although this was reduced to $138 million by the end of March 2008.
Timor-Leste has changed its fiscal year to the calendar year; the budget for 2008 estimates a sustainable income of $294 million, and plans to transfer all of it. As Parliament was debating the budget in December 2007, the Petroleum Fund Consultative Council wrote a Public Declaration questioning some of the calculations.
The balance in the Petroleum Fund on 31 March 2008 was $2,629,962,998.
Petroleum Fund Quarterly Reports
The BPA is required to publish reports on the Petroleum Fund 40 days after the end of each quarter. The BPA also issues a quarterly press release summarizing the report. La'o Hamutuk published a comprehensive article on the Fund in our March 2007 Bulletin.
These reports and press releases are often available in Portuguese and Tetum at http://www.bancocentral.tl/PF/Reports.asp.
The first Annual report of the Petroleum Fund, covering September 2005-June 2006, was published in June 2007. The second Annual Report, for July 2006-June 2007, was published in January 2008.
The only petroleum revenues Timor-Leste earns at present come from Bayu-Undan in the Joint Petroleum Development Area established by the Timor Sea Treaty. This is managed by the Timor Sea Designated Authority, which publishes monthly revenue information at http://www.timorseada.org/ftpet.html; their detailed breakdown is on this CD. In the Petroleum Fund Quarterly Reports, these are referred to as "taxpayer receipts."
During 2008, the Government began a discussion about loosening the rules on investing and withdrawing from the Petroleum Fund.
The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)