-June 2005 (page 1)
East Timor PM Sees Intl Bank Role In Oil Fund
East Timor is considering bringing in one or more foreign banks to help manage the country's new Petroleum Fund, but hasn't yet decided which ones, Prime Minister Mari Alkatiri said Thursday.
"We have been approached by some (foreign banks), but we are waiting for the approval of the parliament," he said in an interview with Dow Jones Newswires.
He wouldn't give additional information about the banks.
The fund is due to be launched on July 1. It has been charged with housing all of East Timor's petroleum royalties and returns from its investments, with a view to accelerating development of the impoverished nation.
East Timor government projections indicate that the fund will accumulate at least $4 billion over 20 years, generating annual interest earnings and real earnings of $200 million and $120 million respectively over the same period - a significant portfolio for any bank called in to help in its operations.
Those estimates don't include revenues the government will eventually derive from Woodside Petroleum Ltd's (WLP.AU) stalled $5 billion Sunrise gas project in the Timor Sea.
East Timor's current petroleum output consists of gas condensate, or wet gas, that ConocoPhilips (COP) extracts under license from the Bayu-Undan project in the joint Australia-East Timor development area in the Timor Sea.
ConocoPhilips sells on the open market gas condensate and liquid petroleum gas extracted from the area and pipes natural gas to Darwin where it's liquefied and then sold to buyers in Japan.
Bayu-Undan began production in February 2004 and has a life expectancy of 20 years. Projections indicate the area will produce revenues averaging $250 million annually in that period
East Timor will kick off an oil and gas licensing round in August with the release of seismic data followed by an international roadshow that will include the U.S. and the United Kingdom.
Deadlines for bids will occur in first quarter of 2006 and the bid awards will be issued in the second quarter of next year.
Fund Will Invest In Foreign Bonds, Equities
East Timor and Australia will hopefully agree by mid-July on a revenue sharing agreement needed to kickstart Sunrise into development, Alkatiri said, without elaborating.
Issues including East Timor's insistence that Australia recognize the former Portuguese colony's sovereignty in the gas field area have hamstrung efforts to get Sunrise back on track.
Alkatiri said he modeled the fund, which he refers to as "my baby", on a similar savings and investment vehicle created by the Norwegian government.
Representatives of Norway's finance ministry and central bank advised on the fund's development.
The fund aims to ensure that revenues derived from East Timor's petroleum resources are accumulated, invested and disbursed by the most sustainable, transparent and effective means possible.
East Timor's central bank will serve as the fund's operational manager and two separate government committees will advise the government on issues including fund-related investment options.
"The baby will grow up and guarantee a safe management of the (oil and gas) resources...and save some amount of money for future generations," Alkatiri said.
The government will initially restrict investment of monies from the fund to "lower risk" foreign bond purchases including U.S. Treasuries, Alkatiri said.
The government will decide the specific bond investment mix in the next two to three weeks.
Alkatiri said the fund's investment mix will eventually extend to foreign equities in line with the capacity of the government to make prudent investments in that area.
"Our (investment) management capacity is still very weak," he said.
(But) the law gives us the possibility to have 10% (of investment funds) at least for the next ten years to invest in equities to get some experience and to get some capacity."
Dow Jones Newswires, Phelim Kyne
Thursday 23 June 2005
E Timor passes initial oil, gas legislation
The East Timorese Parliament has reached agreement on the management of revenue generated from a new batch of oil and gas fields.
The Parliament unanimously passed the first of three laws that paves the way for the exploration of potential petroleum reserves in the country's undisputed maritime region.
The Petroleum Fund Act will manage the money generated by that exploration.
Secretary of State for Natural Resources and Energy Policy Jose Teixeira says the fund will make sure the resource curse that has affected other developing countries does not happen in East Timor.
"It does that by ensuring that all of the revenues, all payments received from petroleum exploration are paid into a fund which will be managed and supervised in a transparent and accountable way adopting the world's best practice in transparencies," he said.
The first comprehensive seismic survey of East Timor's undisputed maritime area shows there could be oil reserves covering 30,000 square kilometres offshore, as well as about two dozen oil seeps onshore.
Before the region can be opened up to exploratory drilling, several other key pieces of legislation must be passed.
Prime Minister Mari Alkatiri says the result shows all political parties realise proper management of petroleum revenues is crucial to the country's future.
The other laws should pass by the middle of next month.
Wednesday 22 June 2005
East Timor's parliament has approved the government's plan to create a petroleum fund
The fund is to be used for the management of the nation's oil and gas revenues.
Parliament passed the plan with 68 votes in favour, none against and no abstentions.
It is the first time the national assembly has passed a new law with unanimous approval.
Prime Minister Mari Alkatiri says the result demonstrates that MPs from all political parties understand that sound management of oil and gas revenues is of critical importance for the nation's future.
The legislation will clear the way for on and off-shore reserves in East Timor's undisputed maritime area to be drilled next year.
Wednesday 22 June 2005
IIMF urges East Timor to manage energy wealth 'responsibly'
The International Monetary fund (IMF) says East Timor has made commendable progress since independence from Indonesia, but needs to do much more to manage its energy wealth.
The IMF and the World Bank concluded a joint review last week of a National Development Plan presented by the East Timorese government.
The IMF says there has been progress by maintaining peace and stability, building state institutions, and improving basic service delivery.
However, the Fund says significant challenges remain in speeding up growth and employment creation and managing the country's oil and gas resources.
The IMF says close co-operation between Prime Minister Mari Alkatiri's administration and foreign donors will "remain critical" to East Timor's immediate future.
East Timor, a former Portuguese colony, broke away from Indonesia in May 2002 after a 24-year armed struggle.
Tuesday 21 June 2005
East Timor PM sees Sunrise
East Timor's Prime Minister, Mari Alkatiri, is confident the oil and gas deal with Australia remains on track but wants to discuss with Woodside managing director Don Voelte the feasibility of piping gas from the Greater Sunrise field straddling the two countries' maritime borders to East Timor rather than Darwin.
Woodside, the operator of Greater Sunrise, which was mothballed on January 1, with the talks in deadlock, has said the option of piping gas to East Timor is not technically viable because of the depth of the Timor trench. It favours sending the gas to a plant already being built in Darwin by ConocoPhillips to process gas from the Bayu-Undan field.
But Dr Alkatiri said he wanted Canberra to give assurances that it would not stand in the way of a pipeline to East Timor, if the Sunrise owners chose to take it there, and that it would not provide subsidies for the Darwin option.
He also said he was seeking to ensure that if both governments agreed, the boundary issue Australia wants it calculated from its continental shelf, East Timor from its coast line could be reopened.
Under the deal between Australia and East Timor negotiated in Sydney last month, Canberra and Dili would split equally the royalties from the Sunrise field, rather than the 82-18 split in Australia's favour arranged earlier. Discussion of the maritime boundary would be postponed for 50 years.
Speaking in Melbourne on Friday, Dr Alkatiri said there had been some delays in finalising the agreement for which the last negotiating round was held in Sydney on May 13 while he was travelling in Europe promoting investment in East Timor.
He said he was still awaiting the final draft of the deal, for which "technical people have been working on the details" in both countries.
"It's a very complex question," he said. "And it's a generational agreement, which affects the sovereignty of both countries."
So it would not be rushed. But, he said: "Generally, it looks fair."
The deal would require approval from the respective parliaments of East Timor and Australia.
He said oil and gas revenue flowing to East Timor would be quarantined within a petroleum fund loosely based on that of Norway. It would provide transparency and fiscal stability, he said.
"The tendency of many countries with such non-renewable revenues is to use it in a very short time, creating a boom and overheating the economy. And when the resources are depleted, they are left with nothing."
Dr Alkatiri said he was also seeking to avoid over-dependency on oil and gas by attracting investment in agribusiness, fisheries, tourism and other sectors.
A new investment law, he said, provides fiscal incentives, including tax credits for job creation.
The Financial Review, Rowan Callick
Monday 20 June 2005