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TSO Press Statement: Timor-Leste Welcomes Start of Production at Bayu-Undan, February 13 2003

The Prime Minister of Timor-Leste (East Timor), Dr Mari Alkatiri today welcomed the start of production from the Bayu-Undan field in the Timor Sea.

A regular flow of wet gas from the wells on the floor of the Timor Sea was confirmed today by ConocoPhillips, the operator of the project.

The US$1.8 billion investment by the Bayu-Undan joint venture in the first phase of production reaffirms Timor-Leste's capacity to offer a stable and attractive business environment to foreign investors. The start of production at Bayu-Undan comes less than two years after Timor-Leste regained its independence in May 2002.

"The start of production is an historic milestone in Timor-Leste's struggle for economic independence. The Bayu-Undan project is expected to provide a significant source of revenue to our economy over the next 20 years, averaging more than US$100 million a year, " Dr Alkatiri said.

"I acknowledge the professionalism of the Bayu-Undan joint venture in bringing this enormous project to fruition, he added.

"People from Timor-Leste have played an important role in this project. About 70 Timorese worked on the platforms during the construction phase after undergoing rigorous training. This is a significant achievement given that our people had no previous experience in this internationally-competitive industry, Dr Alkatiri said.

The Government of Timor-Leste gave high priority to getting an international legal regime in place that would enable the development of this project. Coinciding with independence on 20 May 2002, the governments of Timor-Leste and Australia signed the Timor Sea Treaty. This Treaty created the Joint Petroleum Development Area (JPDA) in an area of the Timor Sea, within which Bayu-Undan is located. Timor-Leste earns 90 per cent of the tax and royalty revenues paid by companies working in the JPDA.

Bayu-Undan contains estimated recoverable reserves of 400 million barrels of condensate (light oil) and liquefied petroleum gas (LPG), and 3.4 trillion cubic feet of natural gas. It is located in 80 metres of water about 250 kilometers south of Suai, Timor-Leste, and 500 kilometres northwest of Darwin, Australia.

In this first "liquids" phase of the project, which commenced this week, the Bayu-Undan platforms will process wet gas. Condensate, together with propane and butane, will be separated and shipped while dry gas will be re-injected back into the reservoir. The dry gas will be recovered and piped to Darwin, Australia during the second "gas" phase, which is expected to begin in early 2006. ConocoPhillips and its partners have signed binding contracts for the sale of nearly all of the natural gas reserves with Tokyo Gas and Tokyo Electric companies in Japan.

ConocoPhillips has a current participating interest of 56.72 percent (this includes 8.25 percent interest held by Petroz). Co-venturers and their current participating interests are: Eni Australia, 12.04 per cent; Santos, 10.64 per cent; INPEX, 10.53 per cent; and Tokyo Electric Power and Tokyo Gas Company, 10.08 per cent.

For more information, go to www.timorseaoffice.gov.tp
Contact: Paul Cleary +670 723 4151; pcleary_tso@yahoo.co.uk;
Manuel Mendonca; +670 723 4155; mendonca_timor_sea@yahoo.com.br


TSO Press Statement: Maritime Boundary Talks between Timor-Leste and Australia, November 13 2003

The governments of East Timor (Timor-Leste) and Australia yesterday held preliminary talks in Darwin on establishing permanent maritime boundaries in the Timor Sea.

The Government of Timor-Leste hopes and expects that the Australian Government will approach upcoming maritime boundary talks in a manner consistent with Prime Minister John Howard's pledge to negotiate "in good faith". This is Australia's legal obligation. Given that Australia has so far refused to exercise the restraint required at international law pending delimitation, Timor-Leste has urged Australia to commit to a rigorous schedule of talks in order to resolve the boundary quickly.

Timor-Leste inherited no maritime boundaries from Portugal, Indonesia or UNTAET. The Timor Sea Treaty and related agreements between Timor-Leste and Australia are interim measures that will terminate upon the delimitation of permanent maritime boundaries. Timor-Leste Prime Minister Dr. Mari Alkatiri said the start of talks marks an important first step towards resolving Australia and Timor-Leste's competing claims and recognizing Timor-Leste's right to determine its maritime boundaries.

Timor-Leste's claim in the Timor Sea is based squarely on its entitlement at international law. It extends to all of the Timor Sea Treaty area (which includes the Bayu-Undan field), the Greater Sunrise field, and the Laminaria, Corallina and Buffalo fields. All of these fields are closer to Timor-Leste than to Australia.

Australia has an international legal obligation to exercise restraint in regard to the exploitation of resources in disputed maritime areas. Despite this, Australia is unilaterally exploiting the Laminaria, Corallina and Buffalo fields. Timor-Leste has not received one penny of the approximately U.S.$2 billion that Australia is estimated to collect from these fields. Further, on April 22 of this year, Australia awarded a new permit in an area adjacent to the Sunrise field (Permit NT/P65). This was only weeks after the Sunrise unitisation agreement was signed, and months after Prime Minister Mari Alkatiri had written to the Australian Prime Minister asking that Australia exercise restraint in relation to areas of overlapping claims in accordance with its obligations under international law.

Resolution of the maritime boundary dispute is all the more pressing, as Timor-Leste is one of the poorest nations in the world and requires substantial resources for national reconstruction and development. Timor-Leste would prefer to have access to its own resources to accomplish this, rather than depend on foreign aid.

CONTACT: Paul Cleary +670 723 4151; Alisa Newman Hood +670 723 4152; Manuel de Lemos +670 723 4154


TSO Press Briefing, Maritime Boundary Negotiations between East Timor and Australia, October 2003

The Government of East Timor (Timor-Leste) welcomes the commitment from the Australian Government to hold a first round of maritime boundary negotiations during the week commencing November 10.

The start of negotiations marks an important first step towards recognizing East Timor's right to determine its maritime territory. East Timor inherited no maritime boundaries from Portugal, Indonesia or UNTAET. The Timor Sea Treaty and related agreements signed between the East Timor and Australian Governments are interim measures that will terminate upon the delimitation of permanent maritime boundaries.

In welcoming Australia's willingness to start negotiations, Timor-Leste Prime Minister Marí Alkatiri urged Australia to commit to a timetable for the completion of discussions. He said this would be consistent with the commitment by Australian Prime Minister John Howard to proceed "in good faith" in these talks with Timor-Leste.

"The Timorese people have real hope that our hard-won political independence will be followed by economic independence. The people of Timor-Leste have the right to know the limits of their territory and what natural resources are theirs," Dr Alkatiri said.

"In addition to being entitled to maritime boundaries, Timor-Leste needs them. Generous donor assistance has given us a head start, but it is revenues from our natural resources that will allow future generations of Timorese to stand on their own two feet," he added.

East Timor's Maritime Zones Act of 2002 sets out East Timor's 200 nautical mile maritime boundary claim, which is consistent with international law. East Timor's claim extends to all of the Timor Sea Treaty area (which includes the Bayu-Undan field), the Greater Sunrise field, and the Laminaria, Corallina and Buffalo fields. All of these fields are closer to East Timor than to Australia.

East Timor is one of the poorest countries in the world. The vast majority of the population lives a subsistence lifestyle on less than US$1 a day. Schools, hospitals and rebuilding of roads are urgently needed. The destruction that followed the violence of 1999 still remains visible today.

The revenue from the Bayu-Undan field, which lies in the Timor Sea Treaty area, will be important for East Timor's development in the near and medium term, but revenues from this field are projected to peak within 10 years. East Timor will need to secure the greater and longer term sources of revenue that maritime boundaries based on international law will deliver in order to free the nation from entrenched poverty and underdevelopment.

With the assistance of the World Bank and IMF, the Government of East Timor is planning to establish a petroleum fund to manage petroleum revenues transparently and responsibly.

The Government of Timor-Leste wishes to assure Timor Sea investors that East Timor will maintain its attractive fiscal and regulatory framework for investment after maritime boundaries are agreed. The most stable regime for investment in the Timor Sea is a permanent boundary regime.

CONTACT: Paul Cleary +670 723 4151; Alisa Newman Hood +670 723 4152; Manuel de Lemos +670 723 4154


Statement by H.E. Prime Minister Mari Alkatiri, On the occasion of the Extractive Industries Transparency Initiative (EITI) Multi-stakeholder Conference 17th June 2003, London

Good Morning/Afternoon:
Baroness Valerie Amos Secretary of State for International Development
Distinguished Guests
Ladies and Gentlemen

Thank you Honourable Secretary of State for the invitation to attend this Conference, and for the opportunity to make a statement on behalf of the world's newest nation, the Democratic Republic of Timor-Leste.

The Timor-Leste Government wishes to state its support of the Extractive Industries Transparency Initiative, and we welcome the opportunity to participate in the Initiative. We view this as a positive step towards achieving our goal of open and transparent government, and take this opportunity to commend Prime Minister Tony Blair for fostering this initiative.

After a year of independence we are a nation in the process of successfully building a democratic and sovereign state. We recognise that success will only come with good governance and that is why we have been focusing in the last year on creating an institutional culture, by setting up structures and institutions which can manage decision making processes in all arms of government in a responsible manner.

Strong institutional culture and good governance can only be achieved through accountability and transparency in all levels of Government and the public sector. However, to achieve this it is essential that our people are properly armed with the skills required. Assistance from the international community in education, employment and training of Timor-Leste nationals in the petroleum sector will help Timor-Leste achieve this objective.

The oil and gas industry is of the utmost importance to the ongoing development and growth of Timor-Leste. Proper management of revenues from this sector is critical in ensuring a strong economic and stable political future, not only for the current generations, but for the future generations too. Generation equality is a central feature of the policies and structures we aim to put in place.

This Conference comes at an important time for Timor-Leste. With Bayu-Undan, a world class liquids and gas project in the Timor Sea, set to go into production in 2004, Timor-Leste will start to receive considerable amounts of petroleum revenues. The world will be looking at Timor-Leste and whether we manage our petroleum revenues transparently.

We therefore intend to set up a Petroleum Fund to meet our aims. We have sought advice on international best practice that we can adapt to our needs from the IMF, World Bank and ADB. A Petroleum Fund is no substitute for sound fiscal management. It can, however, support sound fiscal management if it has wide political and popular support, clear rules and stores genuine savings by the Government.

Our Fund will be integrated into the budget process. Fund assets will be prudently managed and invested offshore. The rules and operations of the fund will be transparent with stringent mechanisms to ensure accountability and prevent misuse. At the same time our Fund will maintain the sovereignty of Parliament over revenue-raising and spending decisions.

We have learned from the experience of our friends in Norway and call the model we shall adopt "Norway Plus".

Very simply, the Fund will receive all our petroleum revenues and build up a balance that earns income. The Fund's objective is to maintain the real value of petroleum wealth (both financial assets from petroleum already produced and estimated revenues from petroleum still in the ground), thus protecting the interests of future generations. Withdrawals from the Fund will meet the difference between our spending and our non-petroleum revenues.

The "plus" in Timor-Leste will be firstly, a guideline that only sustainable income from our petroleum wealth can be spent and, secondly, a range of accountability mechanisms including an independent Fund Council to oversee the operations of the Fund.

If government proposes to spend more than the sustainable income from petroleum wealth it must give a separate justification to Parliament and also estimate the long-term effect on petroleum wealth.

For transparency, we shall publish what goes into the Fund and publish what is taken out. Its accounts will be independently audited. We want the people of Timor-Leste and the rest of the world to know that this nation can make good use of its oil and gas wealth as it is extracted from the Timor Sea.

At present we are dealing with only one major project, developed under the Timor Sea Treaty between ourselves and Australia. We aim to complete our sovereign independence by settlement of permanent maritime boundaries between Timor-Leste and its neighbours as soon as possible. When that is done, we confidently expect additional major petroleum projects to be feasible. Thus it is vital that we put in place proper management structures for petroleum revenues from the outset.

Thank you


TSO Media Release: Australia is undermining "Greater Sunrise" development, 22 March 2004

Australian Government claims that the Greater Sunrise field lies partly in an area of sole Australian jurisdiction contradict the International Unitisation Agreement and undermine prospects for its approval, said Timor-Leste Prime Minister, Dr. Mari Alkatri.

In the course of pursuing ratification of the Greater Sunrise IUA, the Australian Government has repeatedly asserted that Greater Sunrise lies partly in an area of exclusive Australian jurisdiction. The IUA, however, clearly states that this is an area of overlapping claims.

Australian parliamentarians and other government officials have made such statements in defending the IUA before the Joint Standing Committee on Treaties (JSCOT), and to the Australian people. The claim was also made repeatedly in seeking passage of the legislation that would implement the Sunrise IUA - both in the explanatory memorandum that was presented with the legislation, and in oral defense of it.

"We signed this agreement on the clear understanding that Australia recognized our claims and sought not to prejudice our rights in the Timor Sea, as stated in the IUA, and that consequently, it would engage in good faith negotiations on permanent boundaries", said Dr. Alkatiri.

Timor-Leste has proposed monthly meetings aimed at resolving this dispute expeditiously. Australia has said it only has resources to meet twice a year. Timor-Leste is one of the poorest countries in the world, and Australia one of the richest.

"While delaying on negotiations, Australia has issued new licenses in disputed areas near Sunrise, and is continuing to derive revenues from other disputed parts of the Timor Sea", according to Dr. Alkatiri.

Since signing the IUA in March 2003, Australia has issued two exploration licenses in disputed areas adjacent to the Greater Sunrise field. Further, Australia had earned an estimated US$1.5 billion since 1999 from the Corallina, Laminaria and Buffalo fields, which are also in disputed areas.

"Australia's unilateral exploitation is inconsistent with the spirit and the letter of the IUA," said Dr. Alkatiri.

International law requires that Australia exercise restraint in respect of the exploitation of disputed maritime areas.

Prime Minister Alkatiri said Timor-Leste was working with Woodside, the operator of the Greater Sunrise Development, to finalize its development plan. He regretted that the statements of the Australian Government had undermined the IUA, and indicated that this highlights the need for permanent boundaries.

"Only a permanent maritime boundary, established in accordance with international law, can deliver the stable investment environment which will serve the interests of petroleum investors and both our countries," he said.

Timor-Leste has repeatedly indicated its willingness to meet monthly with Australia so that a permanent maritime boundary can be agreed expeditiously. It is hoped that Australia will agree to this timetable at the meeting on maritime boundaries next month.

"If maritime boundaries were negotiated in accordance with international law, all of this field would likely be attributed to Timor-Leste. If Australia really believed in its legal case, it would not have withdrawn from the ICJ," said Prime Minister Alkatiri.

Timor-Leste has no maritime boundaries, and securing them is an integral part of the new nation's right to self determination. The resources that Timor Leste is entitled to under international law will be crucial in helping to rebuild the shattered nation, address mass poverty and achieve economic independence. Current interim arrangements for oil and gas developments will earn Timor-Leste US$4 billion over coming decades, which works out at just US$100 per capita per year under a prudent policy of saving half the revenue for future generations.

Under a permanent boundary Timor-Leste could expect to earn US$12 billion over coming decades, thereby giving the new nation its own resources with which to build a better future.

Contact: in Australia Paul Cleary 0431 055 584; Timor-Leste: Manuel de Lemos +670 723 4154
For more information see: www.timorseaoffice.gov.tp


TSO Media Release: Timor-Leste protests unlawful exploitation of its resources, 30 March 2004

The Australian Government's release for auction this week of further oil and gas exploration acreage in the Timor Sea violates international law and is contrary to the Greater Sunrise unitisation agreement approved on Monday by the Australian Parliament, said Timor-Leste (East Timor) Prime Minister Dr Mari Alkatiri.

On Monday, the Australian Government announced the release of exploration acreage which is about twice as close to Timor-Leste as it is to Australia, and on Timor-Leste's side of the median line between the two countries.

On the same day, the Australian Parliament approved a bill for the development of the Greater Sunrise field that explicitly states that part of the field lies in an area claimed by both countries. According to the Greater Sunrise agreement and international law generally, Australia should refrain from unilateral exploitation in disputed areas.

One of lots offered for auction, NT04-1, is adjacent to the Greater Sunrise field, and is twice as close to Timor-Leste. A second block, AC04-1, located in the western part of the Timor Sea, is in an area claimed by Timor-Leste and is also twice as close to Timor-Leste (see shaded areas on map).

The announcement of this auction follows the awarding of an exploration license by the Australian Government in February this year, and another in April last year, in the disputed area. Australia has also derived more than US$1.5 billion in tax revenue from the Laminaria-Corallina fields which are in a disputed area in the western part of the Timor Sea, and are also much closer to Timor-Leste.

Companies considering bidding for these blocks should be aware of the potential risks of investing in disputed territory as Timor-Leste will take all lawful steps to prevent unlawful exploration and exploitation of resources within its maritime zone.

Timor-Leste has proposed monthly meetings aimed at resolving this dispute with Australia expeditiously. Australia has said it only has resources to meet twice a year, even though it is one of the richest countries in the world and Timor-Leste is one of the poorest.

"While stalling on negotiations, Australia is issuing new licenses in disputed areas near the Greater Sunrise field, and is continuing to derive revenues from other disputed parts of the Timor Sea", said Dr. Alkatiri. "International law requires that Australia exercise restraint in disputed maritime areas," he added.

"Australia's unilateral exploitation of our resources in the Timor Sea is inconsistent with the spirit and the letter of the Greater Sunrise International Unitisation Agreement," said Dr. Alkatiri.

The IUA clearly acknowledges Timor-Leste's rights in the area adjacent to Greater Sunrise that is outside the Joint Petroleum Development Area. It states that "Timor-Leste and Australia have, at the date of this agreement, made maritime claims, and not yet delimited their boundaries, including in an area of the Timor Sea where Greater Sunrise lies".

Prime Minister Alkatiri said Australia's unilateral actions highlighted the need for permanent boundaries in the Timor Sea.

"Only a permanent maritime boundary can deliver the stable investment environment which will serve the interests of petroleum investors and both our countries. A permanent boundary is also an integral part of Timor-Leste's right to self-determination and will end the illegal occupation of its territory. As long as Australia continues to illegally occupy this area of the Timor Sea, it is undermining our territorial integrity," he said.

Timor-Leste has no maritime boundaries, and the resources it is entitled to under international law will be crucial in helping to rebuild the shattered nation, address mass poverty and achieve economic independence.

Contact: Paul Cleary +670 723 4151; Manuel Mendonca +670 723 4155
For more information see: www.timorseaoffice.gov.tp

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