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Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges

A Report by La’o Hamutuk
Timor-Leste Institute for Reconstruction Monitoring and Analysis

February 2008

Appendix 7. Glossary

Link to Index and Table of Contents

 

Absorption

The physical or sometimes chemical bonding of small particles or molecules within an absorption agent, which could be a solid or fluid. The bonding is generally strong. For example, dry cement absorbs water, causing the cement to set. The term is also often used in biological processes, such as the absorption of oxygen in blood.

Acid gas

Gas that readily transforms into an acid. For example, H2S and SO2 gases are transformed in the presence of oxygen and water into sulfuric acid. When this happens in the atmosphere it can result in acid rain, which has had disastrous results on Scandinavian and Canadian pine forests.

Activated carbon

Also called activated charcoal or activated coal, usually derived from charcoal. It has an exceptionally high surface area, due to its highly porous nature, and is therefore a very effective adsorption agent.

Adsorption

The physical bonding of small particles or molecules to the surface areas of an adsorption agent, another material which is usually a solid. Adsorption bonding is generally weaker than absorption. See also activated carbon and molecular sieve.

Amine bath (aqueous, organic)

A solution of organic compounds with chemical groups containing nitrogen as the central atom. An amine bath can help to “wash” natural gas of contaminants like carbon dioxide and hydrogen sulfide. Often used are: monoethanolamine (MEA), diglycolamine (DGA), diethanolamine (DEA), diisopropanolamine (DIPA) and methyldiethanolamine (MDEA).

Aqueous

Water-based. An aqueous solution is something dissolved in water.

Arbitration

A method of resolving disputes where a third party, such as a jointly-agreed panel, makes a decision. The two disputing parties agree in advance to accept the arbitrator’s decision. If the parties cannot agree on an arbitrator, he/she could be appointed by an impartial agency.

Archaeological patrimony

Ancient socially or culturally significant objects, including art, tools and/or structures, that could help to understand how earlier societies lived. The pyramids of Egypt and the rock paintings at Ile Kere Kere (Lautem district) are examples. Many countries protect their archaeological patrimony from being destroyed by development.

Asphyxiation

Suffocating, a situation in which a person or animal, cannot get enough oxygen from the air. Asphyxiation can occur in closed spaces where air is displaced or not renewed, or near fires, which consume oxygen.

Atlantic LNG

An LNG project in Trinidad and Tobago, and the company which operates it. The company began to liquefy natural gas for export in 1999 with a single ‘train’ or liquefaction unit, and currently has four trains with a capacity of 14.6 mtpa, employing about 400 people.

Atmospheric emission

Release of tiny particles or gases into the air, one form of pollution.

Audit

An examination of financial records or analysis carried out by an expert (auditor) who is independent of the people who prepared the records. The auditor certifies that the records are accurate, and reports on any inconsistencies or differences from accepted accounting practices. Audits can be internal (done by the agency which prepared the records) or external (done by someone from outside the agency). Audit reports are often made public.

Banking and Payments Authority (BPA)

The Central Bank of Timor-Leste, a semi-independent government agency which is responsible for managing Government assets and regulating the banking sector. The BPA also manages investments and operations of the Petroleum Fund, reporting on its activities.

Barrel (of oil)

A standard measure of oil, 42 U.S. gallons or 159 liters.

Barrel of oil equivalent (BOE)

A unit to describe the amount of energy produced by burning petroleum or natural gas, the same as from burning one barrel of oil. This unit makes it possible to compare reserves of different fuels in familiar crude oil terms. One trillion cubic feet (tcf) of natural gas is approximately 180 million BOE (mmboe).

Bathymetry

The study of underwater depths, such as of the ocean floor. A bathymetric map usually shows floor relief or terrain as contour lines, and may additionally provide surface navigational information.

Bayu-Undan

A large oil and gas field in the JPDA, exploited by ConocoPhillips; it began oil production in 2004 and gas production in 2006. This field provides nearly all of Timor-Leste’s current petroleum revenues.

Bn

Billion (1,000,000,000)

British thermal unit (BTU)

A measure of energy. One Barrel of Oil Equivalent (BOE) is equal to about 5,800 BTU.

Carbon Dioxide (CO2)

A chemical compound consisting of one carbon atom and two oxygen atoms, It is a gas at standard temperature and pressure, and is produced by burning wood, petroleum or natural gas. Although CO2 is not toxic, large amounts of it released into the atmosphere are altering the global climate. (see also: greenhouse gas).

CMATS

The Treaty on Certain Maritime Arrangements in the Timor Sea, signed between Australia and Timor-Leste on 12 January 2006 to allocate upstream revenues from Greater Sunrise areas while deferring maritime boundary discussions.

Condensate

Light oil (sometimes called “natural gasoline”) which forms the heaviest component of natural gas. It is found in many natural gas fields including Bayu-Undan and Sunrise. Condensate can be extracted and used as liquid fuel or for petrochemicals without the refining process required for heavier crude oil. Condensate can be processed at sea and loaded onto ships for transport to customers. Its market value is similar to crude oil, higher than gas.

ConocoPhillips

The sixth largest oil company in the world, based in Texas, USA, with more than 38,000 employees and operating in more than 40 countries. The 2002 merger of Phillips Petroleum (long involved in the Timor Sea) and Conoco created ConocoPhillips, the operator and majority owner of Elang-Kakatua and Bayu-Undan in the JPDA, and also owns 30% of Greater Sunrise.

Contaminant

An unwanted substance in a mixture which could damage or reduce the value of the main component, such as an impurity. For example, in an LNG plant mercury is a contaminant as it speeds corrosion of processing equipment. When disposed of improperly, mercury can become a dangerous environmental pollutant, killing fish or causing them to be poisonous to people or animals which eat them.

Continental shelf principle

A now-outdated way to define maritime boundaries between two nearby countries, based on the depth of the water between them. Water less than 200 meters deep (the “continental shelf”) was seen as the natural extension of the country’s land territory. The 1972 Australia-Indonesia seabed boundary treaty, which followed the deepest water between the two countries, was based on this principle. Many geologists see Timor-Leste as part of the Australian continental shelf, with no continental shelf boundary between the two countries. Since the 1982 United Nations Convention on the Law of the Sea, this principle has been replaced by the median line principle, which is based on distance from the coastlines.

Cryogenic burns

Cold contact burns or frostbite, caused by very cold gases and liquids, such as LNG, coming. Skin may become inflamed and painful, and parts of the skin and underlying tissue may die.

Cubic foot

The volume occupied by a cube measuring 1 foot (30.5 cm) in length, height and width. 1 cubic foot is 0.028 cubic meters, and 1 cubic meter is 35.71 cubic feet.

Darwin LNG plant

See Wickham Point.

Decommissioning

The process of shutting down and disposing of a facility after its operations are finished. Many places are now requiring that the site be restored to the conditions existing before the construction of the plant, and that all waste and materials be removed or permanently isolated from the environment. Normally, the initial site license includes decommissioning requirements, and the company must guarantee that decommissioning will be carried out as promised.

Demographic pressure

Impact on the environment by a growing number of human inhabitants, which may use all available resources. Although overpopulation is usually assessed by comparing the number of people with available renewable resources such as food and water, demographic pressure captures additional aspects of quality of life, such as crime, health, employment, and conflict.

Disaster preparedness

Planning and preparation in advance to reduce the effects of natural and/or man-made disasters. This involves prediction and (where possible) prevention, public information systems, and the legislation, agencies, personnel and equipment to minimize the negative impact on vulnerable populations.

Downstream

The refining or liquefaction part of the petroleum process, transforming crude oil or gas as pumped out of the ground (upstream) into a form that can be transported and sold to customers.

Downstream project

The facilities that refine or process petroleum from the raw material extracted by the upstream project, such as an LNG plant or an oil refinery.

Ecosystem

A natural unit consisting of all plants, animals and micro-organisms in an area functioning together with all the non-living physical factors of the local environment. The ecosystem concept illustrates that living organisms are continually interacting with and affecting other nearby organisms in a complex system of inter-relationships.

Enclave

An area surrounded by a different area, and isolated from it, such as of Timor-Leste’s Oecussi district, which is surrounded by Indonesia. The concept is used to describe all kinds of systems within another system, but functioning independent from it. An LNG plant or Special Economic Zone which has minimal relationships with the surrounding area could be considered an enclave.

Environmental degradation

The deterioration of the environment through pollution or depletion of resources such as air, water and soil; the destruction of ecosystems and the extinction of wildlife.

Environmental Impact Assessment (EIA)

The technical and legal process of defining how the environment would be affected by a proposed development and of determining the significance, risks and consequences of the potential impacts. The EIA process, which can be conducted by the developer or government and usually includes public consultation and comment, often results in recommendations for ways to reduce negative impacts. It can be the basis for an Environmental Management Plan.

Environmental Impact Statement (EIS)

A document detailing key elements of a development proposal, a detailed description of the current social, economic, cultural and natural environment, and a determination of potential impacts of the proposed project on this environment.

Environmental Management Plan

A set of documents outlining measures and actions to avoid or mitigate impact of a development proposal on various aspects of a given social, economic, cultural and natural environment. The project operator write the Environmental Management Plan, which is approved by regulatory authorities, and the operator is required to follow it.

Estimated Sustainable Income (ESI)

A projection of the amount of money that can be withdrawn every year from the Petroleum Fund each year for the indefinite future. The ESI is calculated by adding the value of the money in the Petroleum Fund and the petroleum reserves still in the ground (only those with an approved development plan are counted) and estimating how much interest will be earned by investing that amount.

Exclusive Economic Zone (EEZ)

An area of the sea and seabed adjoining a country’s land territory where the country has rights to exploit and sell the resources in and under the water. Under UNCLOS, the EEZ usually extends 200 nautical miles (330 km) from the shore. When two countries are less than 400 miles apart, a process of negotiation, litigation and/or arbitration can decide the boundary between the EEZ, which is usually along the median line, halfway between the coastlines.

Exploitation

The process of extracting oil and gas from the ground, processing it and selling it. Also called production.

Exploration

The process of geological analysis, seismic testing, and testing wells to locate, identify and estimate the size of underground or undersea oil and gas deposits.

F.O.B.

“Free on board” denotes a price paid for a product that does not include shipment to the customer. (e.g. the price an LNG customer might pay to a Timor-Leste LNG plant when the customer takes the responsibility for shipping the LNG to their intended markets.)

Federal Reserve Bank of New York

Part of the Federal Reserve system which serves as the central bank of the United States. The Timor-Leste Petroleum Fund is deposited in this bank, which is the equivalent of lending the money to the United States Government.

Feed gas

Gas coming into an LNG plant from an underground or undersea field, through a pipeline. The first step in a plant is removing contaminants, so that the gas can be liquefied.

First Tranche Petroleum (FTP) revenues

A percentage of the money received for selling petroleum, paid as a royalty to the government(s) from whose territory the petroleum was extracted, beginning from the start of petroleum production. This is one of several sources of government revenue from petroleum development; larger amounts can be earned from profit oil and taxes.

Fiscal year

A twelve-month period used for budgeting and financial management purposes, which may or may not be the same as the calendar year. Timor-Leste’s fiscal year ran from 1 July to 30 June until 2007; beginning in 2008 it will be January to December.

Flaring

The burning of gases (including natural gas) into the atmosphere to dispose of waste. In an LNG plant, some processes which may require flaring include: plant upsets, which interrupt processing and generate gases; commissioning and start-up processing; and loading of LNG tanker vessels when LNG cannot be kept at low enough temperatures to maintain its liquid state.

Floating Storage Offloading (FSO) facility

A floating facility (ship) to perform separation, stabilization and subsequent loading of liquid petroleum products, including condensates found together with natural gas. Such a facility is generally built close to the offshore wellhead platform and used to enable “clean” gas to be transferred to an onshore LNG plant.

Fractionation

A separation process in which a mixture of chemical compounds is divided up into some of its components (fractions), enabling grouping of compounds according to their chemical and physical characteristics. A common process in oil refineries is fractional distillation, which groups compounds according to their boiling points.

Geomorphology

The study of landforms, including their origin and evolution, and the processes that shape them. Geomorphologists seek to understand landform history and dynamics, and predict future changes through a combination of field observation, physical experiment, and numerical modeling.

Global climate change

Changes in temperature, humidity or other characteristics of the earth’s atmosphere over time ranging from decades to millions of years, caused by processes internal to the earth (e.g. volcanoes), external forces (e.g. sunlight intensity), or human activities. In recent years, “climate change” usually refers to warming of the atmosphere as a result of human-generated emissions of greenhouse gases such as carbon dioxide.

Government bond

A type of investment which involves lending money to a government. Bonds can be short or long term, and can return fixed interest rates or fluctuate over time in response to market forces.

Gravity-based structure (GBS)

A support structure held in place by gravity, often in the middle of the sea. A GBS intended for offshore oil platforms is constructed of steel reinforced concrete, with tanks or cells which can be used to control the buoyancy of the finished GBS. When completed, it is towed to the intended location and sunk. The platform structure which a GBS supports is called the topside.

Greater Sunrise

The largest known oil and gas reserve under Timor-Leste’s part of the Timor Sea, including the Sunrise, Sunset and Troubadour fields.

Greenhouse effect; greenhouse gases

The process in which the earth receives more energy input from the sun than it re-radiates back into space, causing warming of the atmosphere, oceans and the planet’s surface. It results from changes in the content of the upper atmosphere, which causes it to reflect infrared (heat) radiation emitted by the earth’s surface back to earth, rather than send it back into space. Certain gases, including carbon dioxide and methane, strongly add to the greenhouse effect and are therefore called greenhouse gases.

Groin

A man-made structure, made from wood, concrete, or piles of rock, extending from the shore. One purpose can be limiting or preventing sediment transport, and is therefore a form of erosion control. Another purpose is permanent (land) access to deeper parts of water, as is the case with the groins built for the Darwin LNG plant.

Gross Domestic Product (GDP)

An indication of the size of an economy and defined as the total market value of all final goods and services produced within a country in a given year. This production is basically measured by looking at expenditure - the summing of all personal spending of households, investment spending of households and companies, and spending by government - and adjusting this sum for spending on imported and exported goods. This total amount, when divided by the population, gives an indication of average individual income. A different measure, Gross Domestic Income (GDI), uses income, including returns on investment, to come to an overall indication of economic activity.

Gross National Income (GNI)

An indication of the size of an economy and defined as the total amount produced by the nationals of the country (GDP is the amount produced within the country), plus income received from other countries (interest, dividends), as well as income earned by companies and individuals abroad, after subtracting similar payments made to other countries. GDP and GDI are chiefly concerned with the region where economic activity takes place, while GNI looks at a region’s “nationals” and who “owns” the production. In the case of Timor-Leste, GNI is significantly higher than GDP because income from offshore oil is included in GNI calculations.

Human Development Index (HDI)

The Human Development Index (HDI) combines measurements of life expectancy, literacy, education (enrollment), and standard of living (GDP) UNDP calculates this index for all countries to produce a “development” ranking of countries. See http://hdr.undp.org/hd/ for the view of development that underpins the United Nation Development Program’s Human Development Index and Human Development Reports. In 2007, Timor-Leste’s HDI was 0.514, ranking 150th of 177 countries rated.

Hydrocarbon

A chemical compound consisting mainly of carbon and hydrogen, such as oil, natural gas, or many petroleum products. The majority of hydrocarbons found naturally occur in crude oil, which itself originates from dead plants and animals buried millions of years ago.

Internal Rate of Return (IRR)

A measure of how profitable investments in a project are. Technically, it is the discount rate that makes the net present value of a cash flow over time equal to zero. More informally, it is the highest interest rate at which you could afford to borrow all the capital needed for the project and still break even.

International Court of Justice (ICJ)

A court in The Hague, Netherlands, where national governments can bring civil cases against one another. The ICJ has often served as a mediator or arbitrator in maritime boundary disputes. In March 2002, Australia gave notice that it would no longer accept ICJ or UNCLOS processes for arbitrating maritime boundaries.

International Unitization Agreement (IUA)

An agreement between two countries to develop a petroleum field or fields that crosses a boundary as a single entity, applying a single system of laws, taxes, environmental standards, safety codes, labor rules, etc. to that field. As gas and oil will flow underground, a single field is usually developed as one project, and it would be impractical for different regulations to apply on different sides of an imaginary line in the middle of the sea. Timor-Leste and Australia signed an IUA for Greater Sunrise in March 2003, but it was not ratified in Timor-Leste and only came into effect with the CMATS Treaty in February 2007.

Inter-tidal pavement

That area of the sea bottom between the highest and lowest sea levels caused by tides.

Investment

Financial investment is lending money to a government or company (such as by depositing in a bank or purchasing a stock or bond), in order to receive a return on investment (interest or dividends). For some investments, the value of the principal (the amount invested) may also increase or decrease over time. It is also possible to invest in the human or physical capital of a country, such as through education, preventive health care or infrastructure, but the Timor-Leste Petroleum Fund is restricted to financial investments. When an oil company undertakes a large project such as an LNG plant, the investment to construct the project could come from the company’s own cash reserves or from outside investors who will be repaid from the plant’s profits.

Investment Advisory Board (IAB)

Advises the Ministry of Planning and Finance regarding investment policies for the Petroleum Fund.

Iralalaro project

A proposed hydroelectric project using water from the Iralalaro Lake in Timor-Leste’s first national park to generate power. It involves the diversion of the entire flow of the Irasiquero River away from its sinkhole at Mainina into a tunnel drilled under the Paitchau Mountains. The tunnel would feed water to generators at sea level on the south coast, involving a fall drop of about 300 meters.

Joint Petroleum Development Area (JPDA)

An area of the Timor Sea between Timor-Leste and Australia, but closer to Timor-Leste. This was defined first in the 1989 Timor Gap Treaty as Zone of Cooperation Area A, and re-established by the 2002 Timor Sea Treaty. It is now jointly developed by Timor-Leste and Australia, with Timor- Leste receiving 90% of the government revenues from upstream production. The JPDA includes the Bayu-Undan and Elang-Kakatua gas and oil fields, and about 20% of the Greater Sunrise field.

Joint venture

A coalition of corporations, in which several companies own shares in a single project or business. All Timor Sea petroleum projects are being developed by joint ventures, which have signed exploration and production sharing contracts with governments or bi-national agencies (such as the TSDA).

Judicial system

The system of courts which administer justice in the name of the sovereign or state, and a mechanism for the resolution of disputes. The term is also used to refer collectively to the judges, magistrates and other adjudicators who form the core of a judiciary, as well as the support personnel who keep the system running.

Land tenure system

The legal regime in which land is owned by an individual or group, who is said to “hold” the land. With origins in classical systems of lords owning the land and tenants holding parts of it, whereby tenants often had obligations to the lord, it now refers to the modern relationship of various parties and land which is held under a lease.

Landfill

Also known as a dump or tip, is a site for the disposal of waste materials by burial and is both the oldest and most common form of waste treatment. A landfill also may refer to ground that has been filled in with soil and rocks instead of waste materials, so that it can be used for a specific purpose, such as for building houses. Materials which contain poisons or other environmental destructive chemicals should not be disposed of in landfills, as they could leak out into nearby water or soil.

Lateral boundaries

The definition of which territory belongs to Timor-Leste and which to Australia in areas east and west of the JPDA. These have not been established, but would be significantly wider than the JPDA according to current international legal principles. The JPDA’s edges were set by Indonesia and Australia in 1972 and 1989, without participation from Portugal or Timor-Leste. Under CMATS, Timor-Leste has conceded Australia’s right to extract petroleum from these previously disputed areas.

Liquefaction (Liquification)

The process of transforming natural gas to a liquid state (LNG) for loading onto ships. This is done in a large factory and requires cooling to -160°C.

Liquefied Petroleum Gas (LPG)

Propane and butane; see natural gas liquids. LPGs are commonly used as a household fuel for cooking or heating.

LNG (Liquefied Natural Gas)

In order to transport natural gas by ship, it must be cooled from its natural gaseous state to be a liquid, so that it requires much less space. LNG is almost 100% methane. See Liquefaction.

Local content (Timor-Leste content)

The proportion of economic activities by foreign companies in Timor-Leste that enters into the Timor-Leste economy. This includes hiring local workers and buying goods and services from local suppliers. See La’o Hamutuk Bulletin of September 2007.

Maritime Commission

Created by CMATS, with equal representation from Timor-Leste and Australia. This Commission will review and consult on issues of environment, security, resource management, and maritime boundary status, but has no authority to negotiate or determine maritime boundaries or make major project decisions.

Market window

A time-limited opportunity to produce and sell something in a profitable or commercially interesting way.

Matrilineal system

A family structure based on the relationships between female ancestors and descendants. It often refers to a system of inheritance from mother to daughter. See also patriarchy.

Median line principle

The currently accepted legal method for settling a maritime boundary when two countries’ Exclusive Economic Zones overlap. As established by the UNCLOS and many ICJ decisions, the boundary should be drawn halfway between the coastlines of the two countries.

Metric ton

A measurement of mass equal to 1,000 kilograms.

Mm

Million (1,000,000).

Modernization

Social evolution theories traditionally see modernization as the process of “lifting” civilization to higher levels of development, in which more modern states would be wealthier and more powerful, and their citizens freer and having a higher standard of living. In this view, modernization is interchangeable with development, and every more modern approach as preferable to the approach already in place. This view is criticized for of giving preference to Western patterns of modernization or development and not paying enough attention to indigenous circumstances or qualities which cannot be measured in money.

Molecular sieve

A material containing tiny pores of uniform size that is used to adsorb gases and liquids. Molecules that are small enough pass through the pores and are adsorbed, while bigger molecules are not.

MTPA or mtpa

Million (metric) tons per year—a measure of rate of LNG production.

Natural gas

A petroleum resource found underground in a gaseous state, consisting primarily of methane and ethane, with smaller amounts of heavier hydrocarbons. It is often distributed as a gas by pipeline (usually after removal of the heavier hydrocarbons), but can be liquefied into LNG for storage or transport by ship. Most of Timor-Leste’s undersea petroleum is natural gas.

Natural gas liquids (NGL)

The heavier components of natural gas extracted by cooling, and consisting of LPG (propane and butane) and condensate (pentanes and heavier hydrocarbons).

Natural resources

Naturally occurring substances that are considered valuable in their relatively unmodified (natural) form. A substance is generally considered a natural resource when the primary activities associated with it are extraction and purification, as opposed to creation. Thus, mining, petroleum extraction, fishing, hunting, and forestry are generally considered natural-resource industries, while agriculture is not.

Net Domestic Product

NDP equals GDP minus depreciation (the loss of value of a product over time). This is an estimate of how much the country has to spend to maintain the current GDP.

Netback price

The price the upstream project receives for the gas it extracts and sells; see Box 10.

Non-renewable Resource

A natural resource, such as petroleum, which is not replaced as it is used and will eventually run out. This is different from a renewable resource, such as water or fish, which can replenish itself if properly managed. Conversion of a non-renewable resource to cash is also called an extractive industry.

Operator

An oil company that is part of a joint venture (often the largest shareholder) and takes responsibility for exploration, drilling, construction and operation of processing facilities. However, all joint venture partners usually make major decisions together, each having a vote in proportion to their share. ConocoPhillips and Woodside Petroleum are the operators of Bayu-Undan and Greater Sunrise respectively.

Osaka Gas

A gas company based in Osaka, Japan. Together with Woodside Petroleum, Shell and ConocoPhillips it is a joint venture partner for the Sunrise development project.

P50

The mid-range estimate of the amount of oil and gas contained in a reserve, also called “proved plus probable” or 2P Other estimates are P90 (“proved” or 1P) and P10 (“possible” or 3P). A P50 estimate means there is a 50% probability that the reserve will contain at least this amount.

Paradox of plenty

Also termed the “resource curse,” this refers to the paradox that countries with an abundance of natural resources tend to have less economic growth than countries without these natural resources. This happens for many different reasons, including a decline in the competitiveness of other economic sectors, volatility of revenues from the natural resource sector, and government mismanagement or political corruption, provoked by the inflows of easy windfalls from the resource sector.

Patriarchy

The structuring of society on the basis of family units, in which fathers have primary responsibility for the welfare of these units. The concept of patriarchy is often used to refer to the expectation that men take primary responsibility for the welfare of the community as a whole, acting as representatives via public office.

Patrilineal

See Matrilineal system.

Peak-shaving

A method commonly used by plants with additional electricity generating capacities. It allows securing of electrical energy at the lowest possible rate through buying of electricity from others when rates are low and manufacturing power internally when rates are high. LNG plants, in this way, buy power from a local grid as well as generate power themselves. The incentive to do the latter depends on costs of buying power and losses incurred by using up gas that could be sold.

Petroleum

A naturally-occurring liquid or gaseous hydrocarbon, resulting from decomposition of living material from millions of years ago. The word often refers to unrefined oil as opposed to gas, another chief product, although petroleum itself is a mixture of liquid and gaseous hydrocarbons.

Petroleum Act

Enacted by Timor-Leste in July 2005, this law defines the relationship between the Timor-Leste government and companies which carry out petroleum exploration and extraction in the country’s land and sea territory, spelling out the contract system, the companies’ fiscal, environmental and other responsibilities, labor and procurement practices, etc. The Petroleum Act governs upstream activities only, and would not apply to an LNG plant. See reference [74] for the text and history of this law.

Petroleum Fund

A fund established by Timor-Leste law in September 2005, that saves and invests government revenues from petroleum, including royalties and taxes. It is managed by the Banking and Payments Authority. The Petroleum Fund is a mechanism for making petroleum income more consistent and predictable from year to year, and for saving some of the revenue for the time when all Timor-Leste’s oil and gas have been extracted. See reference [73]. Additional information on the Fund’s operation, including a link to the text of the law, is available at http://www.laohamutuk.org/Oil/PetFund/05PFIndex.htm.

Petroleum Fund Act

The law defining how the Government manages petroleum-related income using the Petroleum Fund, setting guidelines on how much can be spent each year to balance the needs of current and future generations. See reference [73].

Petroleum Fund Consultative Council (PFCC)

An advisory body which includes former Government leaders and representatives of various sectors of society. It provides advice to the Parliament concerning the Petroleum Fund before Parliament makes any decisions about withdrawing money from the Fund.

Petroleum Mining Code (PMC)

A law adopted by the TSDA in 2005 to govern petroleum activities in new areas of the JPDA. The Bayu-Undan, Elang-Kakatua and Greater Sunrise fields, already under contract, are covered by a previous interim code. The PMC will apply to areas which are contracted from 2006 on. Australia withheld approval of the PMC to pressure Timor-Leste to sign the CMATS Treaty, but approved it in February 2006. Available at http://www.laohamutuk.org/Oil/PetRegime/JPDA%20PMC%208-05.pdf

Phillips Petroleum

See ConocoPhillips.

Principal

An amount of money used for investment, on which interest is paid.

Production Sharing Contract (PSC)

A contract between one or more oil companies (see joint venture) and a governmental body to explore for and develop petroleum resources in a defined area and to sell the petroleum found there. Under the PSC arrangement, the government owns the underground petroleum resources, not the oil companies. The companies act as “contractors” to the government, being paid for their services with a share of production. Australia, UNTAET, and now Timor-Leste have promised the oil companies that PSCs signed during the Indonesian occupation will be honored even if territory or revenue is reassigned.

Profit oil (Also called second tranche petroleum)

Once oil companies have sold enough petroleum to recover their investment in a particular project, a share of additional sales are paid to the government(s) from whose territory the petroleum was taken. This is called profit oil, and is in addition to FTP that is paid from the beginning of production. The companies also pay income or corporate tax on their net profits, after subtracting operating expenses.

Ratification

The act of giving official sanction, usually by multiple sub-national entities, to a formal document such as a law, treaty or constitution. Generally, a treaty does not come into force until it has been ratified by Parliament.

Refrigeration

The process of removing heat from an enclosed space or from a substance, for the primary purpose of lowering the temperature and then maintaining that lower temperature. Its most common applications are household refrigerators and air conditioning units. As refrigeration technology developed into the generation of extreme low temperatures, anything below -180°C is commonly referred to as cryogenics.

Resource curse

See Paradox of Plenty

Revenues

Also referred to as “turnover,” a financial term for the amount of money received in a given time period. For a company this is mostly from sales of products and/or services to customers. For individuals, the equivalent term is income. For government, it refers to the gross proceeds received from taxes, fees, royalties, etc.

Risk discount or
Risk premium

An adjustment in price in order to sell or buy a good or service whose quantity, quality, or delivery is subject to risk. For example, if LNG from Timor-Leste is perceived to be more likely to have its supply interrupted than LNG from Australia, a customer may insist on paying a lower price for Timor-Leste LNG.

Rollover

A large and sudden release of vapor from LNG due to the initial forming of two separate layers with different densities and heat content in a single container, which start mixing rapidly.

Royal Dutch Shell

A multinational oil company of British and Dutch origins. It is one of the largest private sector corporations in the world (2006 revenues were $318.8 billion and profits $26 billion), operating in over 140 countries. The company’s main business is exploration and production, processing, transportation and marketing of hydrocarbons (oil and gas). Shell also has a significant petrochemicals business, and an embryonic renewable energy sector developing wind, hydrogen and solar power opportunities. It owns 34% of Woodside Petroleum and is a joint venture partner in Sunrise.

Rule of law

In its most basic form, the principle that no one is above the written law and there is equality of all before the law. The most important application of the rule of law is the safeguard against arbitrary governance, whether by a totalitarian leader or by mob rule, as it enforces a government to adhere to established procedural steps to retain legitimacy and legality. The concept of “rule of law” per se says nothing of the “justness” of the laws themselves, but simply how the legal system upholds the law.

Sand flat

A nearly flat sandy coastal area alternately covered and exposed by the tides, with no vegetation.

Seabed boundary treaty

Signed between Australia and Indonesia in 1972. This treaty draws a boundary between the two countries’ seabed (ocean floor) resource entitlements, following the continental shelf principle of drawing the line through the Timor Trough, the deepest water between the two countries. Portugal, which was then administering Timor-Leste, refused to participate in the negotiations, so there is a gap in the line off the coast of Timor-Leste.

Shell

See Royal Dutch Shell

Snøhvit (Snow White) LNG project

A 4.3 mtpa LNG plant in northern Norway and operated by Statoil, exploiting the resources of three gas fields in the Barents Sea; Snøhvit, Albatross and Askeladd. The plant is built on a small island, Melkøya, and, due to its isolated nature, nearly all construction work was done in other places.

Stranded gas

A natural gas field that has been discovered, but remains unusable for physical or economic reasons, often because there is no pipeline connecting it with potential customers. LNG is one way to bring stranded gas to market.

Stripper

A device used to “strip” unwanted contaminants from a liquid. In the case of LNG, nitrogen rich vapor is stripped from partially liquefied gas, and carbon dioxide and other contaminants from the amine baths.

Sunrise Commission

Established by the IUA, the Sunrise Commission has two members appointed by Australia and one by Timor- Leste. This Commission will coordinate the work of the Australian government and the Timor Sea Designated Authority (TSDA) regarding exploration and exploitation of petroleum in the Sunrise Unit Area. If there is a disagreement which cannot be resolved by the regulatory authorities or the Sunrise Commission, it can be referred to arbitration.

Sunrise field

See Greater Sunrise

Sunrise task force

A task force set up by the Alkatiri government to conduct preliminary studies on the possibility of processing Sunrise gas in Timor-Leste. It has been re-created by the current AMP government.

Sustainable development

Development that fulfills human needs while maintaining the quality of the natural environment indefinitely. It does not focus only on environmental issues, but takes into account economic and social issues as well. The UN World Commission on Environment and Development calls it development that “meets the needs of the present generation without compromising the ability of future generations to meet their own needs.”

Tara bandu or tarabandu

Tara Bandu refers to traditional Timorese customs that regulate the relationship between humans and the environment surrounding them. For example, it can determine the times when it is forbidden to fell trees, or to pick and collect the produce from plants in certain places that are considered to be sacred or from which many people derive their means of existence. In essence, it is a traditional livelihoods regulatory system that takes into account sustainable development.

Tcf

Trillion cubic feet—a measure of quantity of natural gas. See also: cubic foot

Tectonic plates

The outermost part of the Earth’s interior is made up of two layers: the top layer is mostly solid and rigid. Below it are parts that, although solid, can flow like a liquid on geological time scales. Due to this liquid, flowing nature of the inner part the outer part endures stress causing it to break-up into several tectonic plates, large areas of the earth’s surface. These plates can flow alongside each other, can move apart, or can crush into one another. Timor island was formed through a collision between the Eurasian plate with the Australian plate, folding the latter near the colliding area.

Thermal efficiency

A performance measure of a thermal device such as an internal combustion engine or a boiler. The input to the device is heat, or the heat-content of a fuel that is consumed. The desired output is mechanical work, or heat, or possibly both. The thermal efficiency of an electric generator based on gas turbines, as often used in LNG plants, compares (electric) energy produced with energy produced if the gas was burned normally.

Timor Gap Treaty

Signed between Australia and Indonesia in 1989 to allow the two countries to explore for petroleum in illegally-occupied Timor-Leste seabed territory, with a 40-year term. This treaty closed the Timor Gap in the 1972 Australia-Indonesia seabed boundary line by defining a Zone of Cooperation, later called the Joint Petroleum Development Area (JPDA). The Timor Gap Treaty became meaningless in October 1999, when Indonesia gave up its claim to Timor-Leste.

Timor Sea Designated Authority (TSDA)

A bi-national Australia/Timor-Leste government agency established by the 2002 Timor Sea Treaty to regulate petroleum projects within the Joint Petroleum Development Area (JPDA) of the Timor Sea, including the Bayu-Undan oil and gas field (in production since 2004), part of the larger Greater Sunrise field (which could begin production in about five years), and the smaller Elang-Kakatua oil field (in production 1998-2007, now depleted). The TSDA is two-thirds controlled by Timor-Leste and acts like a government for purposes of contracting with and managing oil company operations in the JPDA.

Timor Sea Treaty

Signed between Timor-Leste and Australia on 20 May 2002, the treaty came into force on 2 April 2003. It continues the JPDA defined in the Timor Gap Treaty, but replaces Indonesia with Timor-Leste and allocates 90% of JPDA government revenues to Timor-Leste. The Timor Sea Treaty had an original duration of 30 years from 2003, but it was extended by the CMATS Treaty to 50 years from 2007.

Trafficking in human beings

The recruitment, transportation, transfer, harboring or receipt of people for the purpose of exploitation. Trafficking involves illicit means such as threat and deception, and targets vulnerable groups. Examples of exploitation are forcing people into prostitution, forced labor or services, slavery, illegal child adoption, or the removal of organs.

Troubadour Field

See Greater Sunrise

Turbidity

The cloudiness or haziness of a fluid or gas caused by tiny particles in it, similar to smoke in air. Turbidity in open water is often caused by waste or sediments resulting from waste disposal. In water high turbidity can increase viral and bacterial matter, as it attaches to the particles, and it can disrupt marine ecosystems.

United Nations Convention on the Law of the Sea (UNCLOS)

Signed in 1982, and adopted by most countries in the world, it entered into force in 1994. This treaty defines laws for many issues relating to the sea, including Exclusive Economic Zones and procedures for establishing maritime boundaries according to median line principles. It also includes a process for resolving disputes, both in court and by arbitration, from which Australia withdrew in March 2002. Indonesia ratified UNCLOS in 1986 and Australia in 1994. Timor-Leste has not yet signed or ratified UNCLOS.

Unitized, Unitization, Unit Area

See International Unitization Agreement.

Upstream

The part of the petroleum process that involves finding and getting the gas or crude oil out of the ground or the seabed and into a pipeline or ship for further downstream processing. This is defined in CMATS as “petroleum activities and facilities before the valuation point” defined in the Sunrise IUA.

Valuation point

The point of the first commercial sale of petroleum extracted from the Sunrise field, which is when natural gas enters a pipeline which leaves the Unit Area. For other marketable components, such as crude oil, condensate, liquefied petroleum gas (LPG, propane), it represents the first sale of the component. (See IUA Articles 1(h), 1(i) and 1(t)).

Water column

Resources contained on the surface and within the water of the sea, including fish and dissolved minerals, but not including the seabed underneath. In 1997, Australia and Indonesia signed a treaty drawing a boundary between their water column resources (fish, etc.). CMATS defines Timor-Leste’s rights to water column resources within the JPDA, and Australia’s rights south of it, but leaves the water column rights in lateral areas unresolved.

Wickham Point

A peninsula in Darwin Harbor, in Australia’s Northern Territory, formerly an environmental sanctuary. A large part of the protected area has been given up to construct a LNG plant, which is named after the area but also known as the Darwin LNG plant. This plant processes natural gas from Bayu-Undan, but could be expanded to also handle gas from other fields.

Woodside (formerly called Woodside Petroleum or Woodside Australian Energy)

Australia’s largest gas producer (although, with 2,900 employees, much smaller than international oil companies), operator of the Sunrise, Laminaria-Corallina and Kuda Tasi/Jahal fields. Woodside is 34% owned by Shell, the second largest oil company in the world.

Zip failure

The cracking of joined metal, especially welding joints, due to extreme cold.

Zone of Cooperation (ZOC)

A portion of the Timor Sea between Australia and Timor-Leste, but closer to Timor-Leste. This was created by Australia and Indonesia in the 1989 Timor Gap Treaty as a way to share petroleum revenues, since they could not agree on their maritime boundary. Its central portion - Area A - became the Joint Petroleum Development Area (JPDA) under the Timor Sea Treaty.

 

Continue to Appendix 8. References

Go back to Appendix 6. Field visit report

Return to Table of Contents

 

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
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