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-June 2005 (page 2)


Timor PM open to processing Sunrise Gas in Australia
East Timor said it would consider a plan for gas from the Greater Sunrise field to be processed in Australia, a promising step in efforts to develop the Timor Sea's biggest resource and provide billions of dollars to the tiny nation.

East Timor and Woodside Petroleum Ltd disagree where the gas should be processed, which has added to a broader dispute between East Timor and Australia over dividing revenues from the field.

East Timor prime minister Mari Alkatiri said he believed transporting the gas via pipeline to East Timor was commercially feasible and still the best option, but did not rule out other options.

"I have to be convinced that technically, commercially its not feasible to do it in Timor Leste," Alkatiri told Reuters on the sidelines of a seminar in Melbourne.

"If I am convinced, then yes, why not? I am a pragmatic person, I am realistic."

Alkatiri said he hoped to meet with Woodside chief executive Don Voelte next week to discuss the options.

Woodside, which is seeking to develop Greater Sunrise at a cost of $US5 billion ($NZ7 billion), has long said it would prefer the gas to be transported to Wickham Point near the northern Australian city of Darwin where a liquefied natural gas (LNG) plant is already being built for ConocoPhillips' Bayu-Undan project.

The Greater Sunrise joint venture partners, ConocoPhillips, Royal Dutch/Shell and Japan's Osaka Gas Co would prefer the gas be processed at an offshore floating facility.

But before Woodside will even consider developing the fields, Australia and East Timor must finalise a draft agreement over splitting Greater Sunrise revenues so it can be put before the parliament's of both countries for ratification.

Alkatiri yesterday reiterated his was optimistic the draft would soon be finalised.

Under the draft agreement, reached in April, East Timor has agreed to shelve talks on drawing up a permanent sea border in exchange for up to $US5 billion in additional royalty payments from Greater Sunrise.

The Greater Sunrise joint venture was originally aiming to deliver its first LNG in 2010 but the project was stalled in December when talks between East Timor and Australia
Saturday 18 June 2005

East Timor edges towards oil deal with Australia
It has been a rollercoaster ride of more than two years of sometimes acrimonious talks between Australia and East Timor on how to share energy reserves in the Timor Sea.

After the fifth round of discussions ended on May 13, Australian Foreign Minister Alexander Downer said the two countries were on the threshold of an agreement that would allow both sides to benefit from major offshore oil and gas projects.

But East Timor's Prime Minister Mari Alkatiri has since said more talks may be needed to iron out remaining issues.

If some of the rhetoric that has been flying around is a guide, Australia has descended in recent months from the rank of Best Friend to Big Bully in its dealings with East Timor, which gained independence from Indonesia just over three years ago.

Some aid, religious, human rights and war veterans groups in Australia joined East Timor officials in accusing Prime Minister John Howard's government of being stingy and bullying a small, weak neighbour. Is that a fair description?

A key issue was whether to negotiate a permanent maritime boundary in the 600km of the Timor Sea that separates the countries and, if so, where to put the line.

The seabed in this area contains valuable oil and gas fields that are being exploited or explored by Australian and foreign companies, and may well contain even greater petroleum riches that have not yet been discovered or proven.

So the position of the boundary would determine how much of the tax and royalty revenue from development of these fields goes to Australia and how much to East Timor. A lot of money is at stake. The known energy reserves in the area are worth an estimated US$32 billion ($45 billion).

Linked to this issue is what kind of relationship should Australia, one of the world's richest societies, have with East Timor, one of the world's poorest. Australia, with New Zealand, played a major role in the United Nations operation in 1999 that helped protect East Timor after its vote for independence from Indonesia triggered mayhem by pro-Indonesian militias. Since then, Australia has been generous with aid and other assistance. But East Timor's leaders argue that the key to their plans to shift the economy from heavy dependence on aid to self-reliance is an assured stream of oil and gas revenue from the Timor Sea

East Timor's leaders wanted a maritime boundary to be fixed halfway between their country's southern coastline and Australia's Northern Territory. The country's former guerilla leader turned-President, Xanana Gusmao, put it this way last year: "How can we prevent poverty if we don't have the money? How can we reduce disease, how can we stabilise the country, how can we strengthen the democratic process, how can we strengthen tolerance?"

There is an interim arrangement between Australia and East Timor covering a large zone in the Timor Sea. East Timor gets 90 per cent of royalties from energy reserves exploited in this zone. This amounts to long-term revenue of about US$8 billion. Australia gets only 10 per cent of the royalties.

But the zone is positioned much closer to East Timor than to Australia because of an earlier deal Canberra worked out with Indonesia, which invaded East Timor in 1975.

The deal was based on a legal argument advanced by Australia that the seabed boundary between Australia and East Timor was naturally determined where Australia's continental shelf plunged into a trough 3000 metres deep about two-thirds of the way to East Timor.

Since then, international law has evolved and a median line has become the generally accepted principle in fixing seabed boundaries between close neighbours. Indeed, Australia accepted the equidistant approach in more recent seabed border negotiations with the Solomon Islands, New Zealand and France in the Southern Ocean.

Some of the oil and gas fields in the Timor Sea - including Greater Sunrise, one of the biggest - lie wholly or partly outside the joint development area in waters claimed by Australia and now East Timor.

If the latter could get the border placed at the half-way mark, many billions of dollars in extra tax and royalty revenue from these fields would flow to East Timor, not Australia.

Canberra was concerned that if it made major concessions to East Timor on the maritime frontier, its credibility with oil and gas companies would be undermined.

It was also worried that Indonesia would demand a renegotiation of its adjacent seabed boundaries with Australia in the Timor Sea that were fixed in the early 1970s, much closer to Indonesia than Australia.

Australia insists any solution must give the companies that plan to invest heavily in the Greater Sunrise project the fiscal, legal and regulatory certainty to proceed. The project was shelved in November but could be revived.

The preliminary deal thrashed out in the last round of talks would postpone for 50 years any agreement on a permanent maritime boundary. In exchange, East Timor would get 50 per cent of tax and royalty revenues, instead of 18 per cent, from the Greater Sunrise area.

In essence, Canberra is offering Dili as much as US$7 billion.

Outlining the preliminary deal in an article he wrote for the Age in Melbourne on May 30, East Timor's Foreign Minister Jose Ramos Horta said the two sides were "on the cusp of securing" the fairest agreement possible on sharing the energy resources of the Timor Sea.

* Michael Richardson, a former Asia editor of the International Herald Tribune, is a visiting senior research fellow at the Institute of South East Asian Studies in Singapore.
New Zealand Herald, Michael Richardson
Friday 17 June 2005

East Timor to look further afield in gas dispute
An East Timorese activist is warning East Timor will look for other energy companies to work with, if Woodside insists on building a gas pipeline to Darwin in the Northern Territory.

Tomas Freitas from the Movement Against The Occupation of the Timor Sea says he has met with the country's Prime Minister Mari Alkatiri.

Mr Freitas says negotiations for a deal over gas reserves in the Timor Sea are far from finalised.

Australia reached a draft agreement with East Timor in mid-May.

After that round of talks, Foreign Affairs Minister Alexander Downer said there probably would not be any need for any further negotiations.

But Mr Freitas says Mr Alkatiri wants to talk further about maritime boundaries.

He says Mr Alkitiri was clear that the pipeline must go to East Timor, and if it did not, the country would find a new business partner.

"The Prime Minister said if the Woodside company wants to pull out of the Greater Sunrise, he can ask many of the companies from around the world to come into Timor to do some gas," he said.
ABC News Online
Thursday 16 June 2005

East Timor Not Ready to Handle Oil, Gas Revenue, Gusmao Says
East Timor's President Xanana Gusmao said his country shouldn't rush to settle a dispute with Australia over offshore oil and gas fields before the three-year- old nation can handle the royalties, which may exceed $14 billion over two decades.

``Why are we rushing? Having billions of dollars to rest in the bank?'' Gusmao said in an interview in Bangkok. ``We already have the institutions, but we don't yet have people who can assure that we will stand on a culture of transparency, a culture of effective handling of problems.''

Australia and East Timor are ``on the threshold'' of an accord to split petroleum royalties from Woodside Petroleum Ltd.'s stalled Sunrise gas project, Foreign Minister Alexander Downer said May 13. Talks on a final settlement on the border between the two countries may be suspended for 50 years, East Timor's Foreign Minister Jose Ramos-Horta said May 30.

East Timor, which broke away from Indonesia in May 2002 after a 24-year armed struggle, wants the boundary at a mid-point between the two countries, in the gas-rich Timor Sea. Australia pushed for the revenue split to be agreed before any territorial settlement. That's the wrong way around, Gusmao said.

``It's fundamental for me as president to guarantee the sovereignty, to guarantee the state, and the fundamental problem is the demarcation,'' Gusmao said while attending a Business Week leadership forum in Bangkok. ``It must be the basis of all the considerations.''


Finalizing sea boundaries, establishing a strong judiciary, responsible police force, and a financial structure including a central bank and a development bank are essential to ensure the country's economy benefits from the oil revenue, and to avoid the money being misspent, or corrupting officials, he said.

East Timor's head of state is not directly involved in the government's negotiations with Australia.

``I am not talking on behalf of the government, because we are separated institutions in our system, but in my perception, we should not rush like we are in a very, very difficult situation of need,'' he said.

Woodside, Australia's second-biggest oil and gas producer, and its partners stopped work on the proposed $3.7 billion Sunrise gas project on Dec. 31 in the absence of an agreement between Australia and East Timor on the division of royalties.

East Timor will receive as much as $5 billion of extra revenue under a proposed agreement with Australia on splitting petroleum royalties from the Sunrise field, Australian Industry Minister Ian Macfarlane said on June 6.


In addition, East Timor will receive about $14 billion over the next 20 years from its 90 percent share of royalties from an area jointly administered by the two countries, Macfarlane told the South East Asia Australia Offshore Conference in Darwin, Australia. The actual amounts depend on oil prices, he said.

United Nations ended its peacekeeping mission in East Timor on May 20, and Australian troops followed this week. About 300 UN representatives remain in East Timor to help the country establish technical systems, rather than security and stability.

The UN administered the territory of about 1 million people after its vote for independence in a 1999 referendum, after which pro-Indonesia groups destroyed about 70 percent of local property and killed more than 1,400 people. Indonesia invaded the former Portuguese colony in 1975.
Bloomberg, Beth Jinks
Thursday 16 June 2005

SBS Radio- Melbourne report
The Prime Minister of TIMOR LESTE, formerly known as EAST TIMOR, says he expects it only be another few weeks before final agreement is reached with AUSTRALIA on oil and gas resources in the TIMOR SEA.

AUSTRALIA and TIMOR LESTE have been negotiating for years on how to divide between them billions of dollars worth of oil and gas revenue.

Last month they decided to leave aside a dispute over the maritime boundary between the two countries, but to continue negotiating on the division of resources.

Prime Minister MARI ALKATIRI , says agreement will be reached very soon.

We are very close to a deal with Australia. Very, very close. We are on track. I think only two or three weeks more with one or two more rounds of conversation, we will get a deal.

Mr ALKATIRI also says TIMOR LESTE has the institutions and skills to deal with the revenue from the TIMOR Sea.

TIMOR LESTE's President,XANANA GUSMAO , has been quoted as saying there is no point in his country receiving revenue yet because it's not equipped to deal with such huge sums of money.

The Prime Minister of TIMOR LESTE (lest-eh), formerly known as EAST TIMOR, says he expects it only be another few weeks before final agreement is reached with AUSTRALIA on oil and gas resources in the TIMOR SEA.

AUSTRALIA and TIMOR LESTE have been negotiating for years on how to divide between them billions of dollars worth of oil and gas revenue.

But Mr ALKATIRI challenges the reports.

I don't believe that this is really the words of President Xanana, because he is fully aware that we are building institutions. Parliament recently approved the laws for the petroleum fund. Of course, we still don't have human capital, human resources to manage. But you can outsource human resources.





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