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NOW BEFORE THE TIMOR-LESTE PARLIAMENT

The Timor-Leste Government has developed a set of laws and model contracts for the development of petroleum resources in Timor-Leste. This follows extensive consultation with the community, both in Dili and in all 13 district centres.

The new regime is a competitive, transparent and stable model for investment in oil and gas resources in onshore areas and in Timor-Leste's exclusive maritime area. A parallel regime for the Joint Petroleum Development Area has also been developed with the Australian Government.

The new regime was designed to be simple, in the form of Production Sharing Contracts, while offering returns to investors which are considered very attractive compared with the region and the rest of the world. The regime is highly flexible and adaptive, making it attractive to develop a broad spectrum of project and field types.

The regime comprises:

The Fiscal terms of the new regime are highly competitive. The Timor-Leste Government's analysis indicates that the overall fiscal impact is in line with that of Australia, and is considerably more competitive than other countries in the region.

The fiscal terms comprise:

  • Royalty at 5% of gross production
  • Recovery of costs and annual uplift (bond rate + 10%, approximately 15% in all) from remainder of production (uplift prior to approval of development plan limited to 7 years)
  • Income tax at 30% on profits from the contractor's share of production
  • Sharing of production 50% to contractor and 50% to the State (or Designated Authority) after recovery of costs plus uplift
  • Supplementary Petroleum Tax (SPT) at 22.5% (net rate) when contractor has earned after-tax return of 16.5% on investment
  • Withholding tax of 5% on gross payments to suppliers and subcontractors (in place of income tax on profits)

 

 
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