2003 Press coverage of Australia - East Timor Boundary Dispute

The first round of "talks about talks" about maritime boundaries between Australia and East Timor took place on 12 November 2003 in Darwin, Australia, more than a year after East Timor requested that the process begin. East Timor asked for monthly discussions until the boundaries were resolved, as was done prior to the Sunrise IUA. Australia said it did not have the capacity for monthly meetings, and would agree to meet again only in late April 2004. After the talks, East Timor's government was not happy.

Other files on this OilWeb CD-ROM discuss how much money Australia has already taken from East Timor from the Laminaria field, and compare this with the aid given to East Timor by Australia to date.

The following are a number of articles from international media in 2003, before and after this first round of negotiations, and leading up to the second round. Articles published in 2004 are on another page. 

Australia, E.Timor aim to divide resource-rich sea

By Michelle Nichols

CANBERRA, Oct 7 (Reuters) - Australia and the world's newest country, East Timor, will next month begin what are expected to be difficult and lengthy negotiations on a maritime boundary through the resource-rich waters separating them.

Billions of dollars worth of oil and gas royalties will be at stake in the negotiations, due to begin on November 10.

"We will get the process underway in November. It's going to be a long and complicated process and we just wouldn't start putting time frames on it," a spokesman for Australian Foreign Minister Alexander Downer said on Tuesday.

Both countries claim maritime boundaries that overlap.

East Timor claims a sea boundary 200 nautical miles from its coast, consistent with its entitlement under international law and the U.N. Convention on the Law of the Sea.

But Australia is also entitled to a boundary 200 nautical miles from its coast.

The neighbours agreed to a temporary revenue-sharing treaty in March, until a maritime boundary is drawn, that splits revenue from a shared 62,000 sq km (23,900 miles) region 90:10 in favour of East Timor.

The Timor Sea Treaty nullified a previous agreement that split the revenues equally between Australia and Indonesia.

East Timorese Prime Minister Mari Alkatiri said on Monday revenue from Timor Sea resources would give his country economic independence. Most of East Timor's population of about 800,000 now survive on less than $1 a day.

"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," Alkatiri said in a statement.

East Timor, which gained independence in 2002 after a 1999 vote to break away from Indonesia, has promised to use royalties to help alleviate poverty, create jobs and improve education.

The Timor Sea holds the Greater Sunrise and Bayu-Undan gas fields and the Laminaria, Corallina, Elang/Kakatua/Kakatua North oil fields.

The Greater Sunrise venture, operated by Woodside Petroleum (WPL), aims to begin supplying liquefied natural gas (LNG) to Asian markets by 2009 by constructing an LNG production plant at sea. Other shareholders are Royal Dutch/Shell (RD)(SHEL), ConocoPhillips (COP) and Osaka Gas Co Ltd (9532).

Bayu-Undan is operated by ConocoPhillips and has a deal to supply three million tonnes of LNG annually for 17 years from 2006 to Tokyo Gas (9531) and Tokyo Electric Power Co (9501).

Other shareholders in the venture are Santos Ltd (STO), Japanese energy group INPEX Corp, Eni (ENI) unit Agip, Tokyo Electric Power and Tokyo Gas Ltd.

Anger in East Timor as Australia plays tough over gas reserves

By Jonathan Steele, The Guardian. October 14, 2003

Australia, which led an international peace force to help East Timor become independent last year, has become the greatest barrier to the country's hopes of breaking free from reliance on foreign aid, according to stark budget figures released yesterday.

Despite starting out as one of the world's poorest and most war-torn states, East Timor stands to benefit from huge gas reserves which lie under the sea that separates it from Australia.

But harsh Australian negotiating tactics over disputed claims to the gas have forced the government to accept that long-promised revenues will not materialise for several more years, if ever.

As a result the Timorese budget deficit for the three years from June next year will be roughly double the $70m (£42m) previously projected, the finance ministry in Dili announced yesterday.

News of the revenue shortfall came as Xanana Gusmão, East Timor's president, started an official visit to Britain. "We're not asking too much from Australia. What belongs to us is ours. We hope Australia can understand that," he told the Guardian in London.

Mr Gusmão has been dubbed Asia's Nelson Mandela because of his long years in prison as leader of the armed struggle against Indonesian occupation, and more recently as a champion of post-conflict reconciliation.

But he could not conceal his anger at Australia's behaviour. "They still haven't agreed when to start maritime border negotiations," he said.

The huge reserves of gas in question are known as the Greater Sunrise field. Although they are closer to East Timor than Australia, they were "awarded" to Australia under a treaty with General Suharto, in 1989.

Economic factors were a key incentive in making Australia one of the first countries to recognise Indonesia's illegal invasion of East Timor after the territory declared independence from Portuguese colonial rule in 1975. An international outcry finally arose in 1999 when the Indonesian army and local militias massacred hundreds of Timorese after a nationwide vote to move to independence.

The Timorese government, with the backing of the UN, announced last year that it wanted to renegotiate the boundary line. Under normal international practice it would be fixed as the halfway mark, putting all of Greater Sunrise inside East Timor's waters.

Australia first announced it would not accept any decisions by independent arbitrators such as the international court of justice, thus leaving East Timor at the mercy of bilateral negotiations with its giant neighbour. Then it persuaded cash-strapped East Timor last year to agree that 20% of Greater Sunrise was part of a "joint production area", giving Australia a right to a share.

Now Australia is declining to set a timetable for completing negotiations on the remaining 80%. By delaying production, the apparent aim is to press East Timor to soften its claim.

"We don't have to exploit the resources. They can stay there for 20, 40, 50 years. We are very tough. We will not care if you give information to the media. Let me give you a tutorial in politics - not a chance," Alexander Downer, Australia's abrasive foreign minister, recently told East Timor's prime minister, Mari Alkatiri, according to a leaked transcript.

Australian officials were not available last night for comment on the budget figures.

"Australia is giving AU$1m in emergency food aid for families affected by a two-year drought and is launching a major new initiative to provide training for East Timor's police," said a spokesman for the high commission in London.

Oil deal is a winner for East Timor

Letter published in The Guardian. October 20, 2003

A legal framework for developing the petroleum deposits in the Timor Sea for the benefit of Australia and East Timor is already complete (Anger in East Timor as Australia plays tough over gas reserves, October 14). The Timor Sea treaty and Sunrise unitisation agreement are a win-win package for both countries and a fair basis for developing resources for mutual benefit and underpinning East Timor's economic viability. The treaty gives East Timor 90% of production from the Joint Petroleum Development Area. This is generous compared with the 50:50 split in the former treaty with Indonesia, especially given that Australia maintains its long-standing claim to the entire continental shelf off Australia.

The revenues East Timor will receive as a result of this distribution will be a major contribution to creating a sound economic base and long-term stability. Development of the oil and gas resources, including the major Bayu-Undan field, is proceeding and revenue has already started flowing.

The treaty contemplates unitising the Sunrise deposit on the basis that 20.1% of the resource lies within the JPDA and 79.9% is attributed to Australia. The unitisation agreement confirms that distribution. Neither instrument prejudices future maritime boundaries between Australia and East Timor.

Australia's removal of maritime boundary disputes from compulsory dispute settlement reflects our view that such disputes are best settled by negotiation, not litigation. We are looking at engaging with East Timor on these issues soon. The purpose of the treaty is to enable the development of the resources of the JPDA, notwithstanding the competing claims. Both sides understand this and the importance of not letting the issue of permanent delimitation generate uncertainty, and potentially delay, or even lead to the cessation of oil and gas production.

Australia has been in the front line of support for East Timor's transition to independence. It remains a lead donor and is among the largest contributors of personnel - military, police and civil administrators - to the UN mission. We remain committed to continuing to assist the new nation's development.

Michael L'Estrange
Australian High Commissioner

Australia the oil bully

Letter published in The Guardian. October 24, 2003

The Australian high commissioner believes that the interim legal framework for Timor Sea oil development is a winner for East Timor (Letters, October 20). In fact, the real winner is Australia.

Under arrangements East Timor signed on its first day of independence, Australia receives revenues from about 59% of the deposits that are closer to East Timor than to Australia. Under accepted legal principles, these deposits would belong to East Timor, but Australia responded reluctantly to requests to begin negotiations on a maritime boundary; preliminary talks begin next month, but, as the Australian foreign ministry said: "We wouldn't start putting time frames on it."

If a boundary is not agreed while there is still oil under the sea, Australia's withdrawal from international legal mechanisms for settling boundary disputes will leave the tiny nation without recourse. Many programmes, including some funded by Australia, teach East Timor about the rule of law. But the lesson of Australia's position is that if the booty is rich enough, law is irrelevant. It prefers to bully a country that needs oil to fund basic healthcare and education.

Australia claims to be a major benefactor of East Timor, but its assistance pales in comparison with the tens of billions of dollars it will reap from East Timor's resources under current arrangements. In fact, Australia has taken in more (over $1.2bn) from the Laminaria oilfield than it has given East Timor in aid. This field began production in 1999 while the smoke was still rising from East Timor, but more than 70% of its oil has already been extracted and sold.

Jesuina Cabral
Charles Scheiner
Institute for Reconstruction Monitoring
Dili, East Timor

Australia and East Timor begin maritime boundary talks

Associated Press, 12 November 2003

CANBERRA, Australia (AP) - Australia and East Timor began talks on Wednesday aimed at settling a bitter dispute over carving up the seabed between the two nations, which holds billions of dollars worth of oil and gas reserves.

The one-day talks in the northern port of Darwin are the first round of negotiations that officials say could take up to five years and eventually will set the maritime boundary between one of the world's most prosperous nations and one of its most impoverished.

Australia and East Timor already have signed deals dividing much of the oil and gas fields, but East Timor now says it was forced to give too much to Canberra.

Once the maritime boundary is settled, it will take precedence over those treaties. But Australia's foreign minister said those pacts are good enough for now.

"Although negotiations on a permanent maritime (boundary) may take some time, legal arrangements are already in place to ensure that benefits from the development of Timor Sea petroleum resources will flow to both countries," Alexander Downer said on Wednesday.

Desperate to get oil and gas revenue flowing, East Timor signed two deals with Australia earlier this year to split the proceeds, even though most of the oil and gas would be on its side if the border were drawn equidistant from Timor and Australia.

Currently, the former Portuguese colony, which is only 600 kilometers (370 miles) north of Darwin, gets just 20 percent of the Greater Sunrise gas field, the richest in the area, while Australia takes 80 percent.

The field is estimated to generate about US$7 billion in tax revenues over the next 25 years and lies only 150 kilometers (90 miles) from East Timor and 400 kilometers (250 miles) from Australia.

East Timor also gets 90 percent of several fields in a "joint development" area to Australia's 10 percent, but those fields are not producing much revenue yet.

Dili also believes it's entitled to three oil fields, which have earned Australia US$1.2 billion in tax revenue since 1999, according to an East Timorese nongovernment organization La-Hamutuk.

Australia has said the deals are generous to East Timor, but Dili has disagreed, even though it has inked the pacts.

"(East Timor) doesn't accept the terms of the Greater Sunrise agreement as in any way permanent," Jonathan Morrow, an adviser to East Timor Prime Minister Mari Alkatiri said after the signing of the deal in March. "We feel we've still got some years left to pressure Australia."

The Timorese government felt compelled to sign the deals to bolster the confidence of resource companies, who were wary of investing millions of dollars into a region where ownership was uncertain.

Andrew McNaughton from the Australia East Timor Association, a nongovernmental group aimed at promoting ties between Australia and East Timor, believes Canberra will be in no hurry to settle the boundary issue because the current deals favor Australia.

"We think East Timor is only getting about 40 percent of its potential assets and Australia is helping itself to the remaining 60 percent," he said.

McNaughton also noted that East Timor relies heavily on its rich neighbor for aid, putting it at a disadvantage in boundary talks.

"In the world of real politics Australia holds the power, so a compromise may be the best outcome," he said.

East Timorese officials declined on Wednesday to comment on the talks.

East Timor PM Accuses Australia Of Delaying Oil Talks

Associated Press, 14 November 2003

CANBERRA (AP)--East Timor's prime minister Friday accused Australia of deliberately dragging out talks aimed at bolstering his impoverished nation's share of billions of dollars worth of oil and gas under the sea dividing the two nations.

Speaking to The Associated Press by phone from the capital Dili, Prime Minister Mari Alkatiri said his tiny country, desperate to get oil and gas revenue flowing, had been pressured to sign a temporary agreement to carve up the riches earlier this year.

"It was always deadline over deadline to have it done in a timeframe that was not easy for ... a new country to respond to," Alkatiri said of the pressure from Canberra and oil companies.

Officials from Australia and East Timor met in northern Australia earlier this week to begin the long process of setting a permanent maritime boundary between the two nations which would settle once and for all each country's share of the oil and gas field.

Alkatiri said East Timor is eager to set the border fast - in three to five years - but added that Canberra is in no hurry, probably because a permanent boundary would scrap existing revenue-sharing treaties that favor Australia.

"We have proposed monthly meetings, they are only ready for twice a year meetings," Alkatiri said. "With this type of schedule maybe my grandson and granddaughter will resolve the problems."

At stake are billions of dollars in revenues needed to drag the half island state out of debt and poverty.

"It would really break our dependency from these donors and the whole process of the development of the country would take another step forward," Alkatiri said.

East Timor gained independence 18 months ago following four centuries of colonial rule by Portugal and 24 years of brutal Indonesian occupation. The country of 800,000 is just beginning the huge task of rebuilding and developing infrastructure.

Outside of Dili, residents live on as little as 55 U.S. cents a day. Many people have no phones, electricity or clean water.

Alkatiri says the border should be drawn in the middle of the 600 kilometers of sea separating one of the world's most affluent nations with one of its poorest.

That would place 90% of the oil and gas reserves on East Timor's side. Australia wants its continental shelf to be the border. In some places that's just 150 kilometers from East Timor's coastline.

Under the current agreement, East Timor gets 20% of the Greater Sunrise gas field, the richest in the area. Australia takes 80%.

East Timor also gets 90% of several fields in a "joint development" area to Australia's 10%, but those fields aren't as lucrative.

Not covered by those treaties are three other fields - Buffalo, Laminaria and Corralina - which lie on East Timor's side of the disputed area. Australia has a 100% claim on those and has received around US$1.2 billion in revenue since 1999.

Alkatiri said Australia ignored a request early this year to stop production in those three fields until the boundaries are settled.

Dili estimates the current deal will give it about US$4 billion in revenues over the next two to three decades. Under what Alkatiri believes are its "entitlements under international law," the country would get US$13 billion.

Over 20 years the difference is between US$200 million a year and US$650 million a year. East Timor's annual budget is now US$80 million.

Australian officials weren't immediately available for comment but have previously described the current division of riches as generous.

Alkatiri rejected that.

"If you applied international law 100% should be ours," he said. "But we are ready to negotiate and resolve the differences."

E Timor's $2.8bn oil claim

The Australian, November 18, 2003.  By Nigel Wilson

East Timor is demanding Australia hand over an estimated $US2 billion ($2.8 billion) it has earned in royalties from the Laminaria/Corallina and Buffalo oil fields in the Timor Sea.

And Prime Minister Mari Alkatiri wants production from the fields halted until a maritime boundary is agreed between the two countries.

Laminaria/Corallina, owned 50 per cent by Woodside and the remainder shared between BHP Billiton and Shell, was until recently Australia's biggest producing oil field.

Production is declining rapidly and is now about 50,000 barrels a day compared with peak output of about 180,000.

Nearby Buffalo is a small field discovered by BHP Petroleum in 1996 and now owned by the Canadian oil company Nexen Inc, which is preparing to decommission the field.

The extent of East Timor's claim on resources owned by Australia has emerged after last week's initial talks in Darwin to explore the scope of discussions on a sea boundary.

East Timor does not accept a boundary negotiated between Australia and Indonesia and has said the Timor Sea Treaty signed in Dili last year is only a temporary arrangement.

Dr Alkatiri's office said after the talks Australia was violating international law by exploiting the oil and awarding new exploration permits.

"Australia has an international legal obligation to exercise restraint in regard to the exploration of resources in a disputed maritime area," a statement issued out of Dr Alkatiri's office said. "Despite this, Australia is unilaterally exploiting the Laminaria, Corallina and Buffalo fields.

"East Timor has not received one penny of the approximately $US2 billion that Australia is estimated to collect from these fields."

The statement added that on April 22 Australia had awarded a new exploration permit adjacent to the Sunrise gas field in an area that East Timor contests.

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

While East Timor's intention to seek a boundary that includes existing production west of the Joint Petroleum Development Area set out in the Timor Sea Treaty has been well flagged during the past three years, the size of the Australian government revenue the new country has identified as its has not previously been made public.

A Woodside official said last night that resolving the boundary was a matter for the two governments.

Canberra officials said last night that East Timor's estimate of the size of government revenues from Laminaria/Corallina and Buffalo was "greatly exaggerated".

And, they said, Australia had no legal obligation to halt production until the dispute was resolved.

Australia Accused of Stalling Boundary Talk

Financial Times [UK] Thursday, November 27, 2003
By Shawn Donnan in Dili

East Timor's prime minister, Mari Alkatiri, on Wednesday accused Australia of deliberately stalling vital negotiations over the two countries' maritime boundaries in a move he said was deterring investment in the world's newest country.

Officials from Australia and East Timor met in Darwin earlier this month for preliminary talks, but Australia refused to agree to monthly negotiations so they are not due to meet again until April next year.

"These negotiations have to be planned and organised and if you are delaying it is because you have the real intention to delay," Mr Alkatiri said in an interview with the Financial Times. "If you are refusing to have a time frame it is because you are planning to delay."

East Timor is seeking to shift boundaries that Australia and Indonesia, its former ruler, agreed to in 1972. The existing lines are seen as generous to Canberra because they put many of the known oil and gas fields in the Timor Sea in Australian waters.

Mr Alkatiri, whose government assumed control from the United Nations in May last year, argues that international law calls for the 1972 boundaries to be moved to a point halfway between the two countries as their traditional 200-mile boundary claims overlap.

"Technically the question is so clear," Mr Alkatiri said. "We don't want to invent the wheel now. Our claim is to apply current international law."

The difference for East Timor and its 800,000 people would be billions in additional royalties because a southward shift in the boundaries would put big oil and gas fields into Timorese waters.

One section in dispute, the Greater Sunrise area, would result in $7bn (€5.9bn, £4.1bn) in royalties for East Timor over its life, government advisers say. The current government's annual budget is just $80m while international donors have spent about $2.5bn on rebuilding East Timor since its violent split from Indonesia in 1999.

The government in Dili, which is due to begin receiving significant royalties from one oil and gas field next year, wants to use the oil revenue to help other sectors of the economy develop. "We do not want East Timor to become a petroleum-dependent country," Mr Alkatiri said.

Because of that, East Timor wants to see the talks resolved quickly and government advisers say they could be wrapped up in three to five years. The government is also worried about royalties now being drawn by Australia from disputed fields that are nearly depleted.

Australian officials say Canberra is busy with other sea boundary talks and its resources so stretched that the discussions could take decades.

They also consider "provocative" a move by Mr Alkatiri to bring back Peter Galbraith, an outspoken former UN official who helped East Timor win a 90 per cent share of royalties from an area run jointly with Australia. The American angered Australian officials by criticising Canberra publicly during negotiations.

Mr Alkatiri said he had brought back Mr Galbraith because of his experience and that the move was not meant to anger Australia. "I'm not intending to provoke Australia," he said. "What I'm looking for is a good solution to the negotiations."

Coalition stretches credibility with Australia's elastic borders

Sydney Morning Herald, November 27 2003
By James Ensor, director, public policy and outreach, Oxfam Community Aid Abroad.

It is not only in relation to asylum seekers that Canberra sees fit to play with boundaries as it suits, writes James Ensor.

Pity the many confused students of Australian geography who, until recent weeks, thought the country's national borders were clearly established. In a bizarre month of border tampering, the long-standing tradition of setting Australia's national boundaries according to international law has been abandoned in favour of a new "elastic band" approach to fencing our borders.

This new and innovative policy approach involves the Federal Government simultaneously shrinking or stretching our borders according to the principles of self-interest and greed.

The supposed threat posed by 14 asylum seekers beaching on Melville Island - 50 kilometres off our northern coast - triggered a frenzy of activity in Canberra designed to tighten our borders by excising Melville and thousands of other islands from the Australian migration zone. Towed back out of Australian waters, the asylum seekers face deportation from Indonesia, a country which has not ratified the 1951 Refugee Convention.

At the same time in Darwin, Australian Government negotiators were furiously stretching our elastic border to a point hundreds of kilometres off our northern coast in negotiations over a new maritime boundary with East Timor.

Under the waters of the Timor Sea between Australia and the world's newest nation lie vast reserves of oil and natural gas over which political tensions between Canberra and Dili are rapidly heating up. Central to the tensions are the tens of billions of dollars worth of oil and gas from an area of the Timor Sea that is currently subject to overlapping maritime boundary claims by the two countries.

With this sort of money at stake, Government negotiators claimed that our maritime boundary in fact extends to the edge of the Australian continental shelf - 400 kilometres off our northern coast - and unsurprisingly, far closer to East Timor than Australia. Such an outcome to boundary negotiations would bring the vast bulk of revenue from the oil and gas deposits into Canberra's rather than Dili's coffers.

East Timor, one of the poorest countries in the world, desperately needs revenues from the Timor Sea oil and gas reserves to meet its development challenges. Only 60 per cent of its people can read and write. Life expectancy is just 57 years and more than one in 10 East Timorese children born today will likely die before the age of five. To confront these challenges, East Timor's paltry annual budget of $US79 million ($110 million) is heavily reliant on foreign aid money - most of which is set to rapidly decline over the next three years, leaving East Timor with an anticipated budget deficit of more than $US130 million.

Against this backdrop there is growing resentment in East Timor towards what is widely perceived as the Australia's lack of good faith in the maritime boundary negotiations which will determine our relative shares of the oil and gas reserves.

The East Timorese appear to have a point. Under interim treaty arrangements, the major oil and gas fields lie in territory exclusively claimed by Australia, sending the vast bulk of revenue flows to Canberra. However, under international maritime law, East Timor could successfully lay claim to a far greater proportion of the oil and gas reserves of the Timor Sea.

This would be achieved by the establishment of a maritime boundary along a middle line between the Australian and East Timorese coasts, through the provisions of the United Nations Convention on the Law of the Sea (UNCLOS), as judged by an independent umpire, the International Court of Justice (ICJ).

But Australia doesn't just play hardball with asylum seekers. Last year, the Government ruled out this option for East Timor by withdrawing from the arbitration mechanisms of UNCLOS and the ICJ. This effectively prevents East Timor from seeking independent resolution under international law of the disputed maritime boundary between the two countries and, at the same time, ensures Australia can continue to delay maritime boundary negotiations.

It is an approach not lost on the East Timor Prime Minister, Mari Alkatiri, who after last week's negotiations in Darwin accused Australia of dragging out the talks to keep revenues flowing disproportionately to Canberra for as long as possible. "We have proposed monthly meetings; they are only ready for twice-a-year meetings," he said.

Australia should conduct its affairs in a manner consistent with international maritime law and our obligations under the 1951 Refugee Convention.

We should agree to process those people seeking asylum as well as commit to achieving a permanent agreed maritime boundary with East Timor. This agreement must be reached within five years or otherwise be referred to the independent umpire for arbitration - the ICJ.

Asia: Australia accused

Energy Compass, 5 Dec. 2003
By James Irwin, Singapore

As well as being sharply criticized for bullying tiny East Timor over where a new maritime boundary should be drawn between the countries, Australia has been condemned by the East Timorese prime minister, Mari Alkatiri, for dragging out boundary negotiations while continuing to pump oil and gas that legally -- some would say obviously -- belongs to East Timor.

Alkatiri says that Australia has emerged as the biggest obstacle to East Timor breaking free of its dependence on foreign aid to survive. Although East Timor should eventually benefit from the huge gas reserves that lie off its southern coast, its government has acknowledged that Australia's tough negotiating tactics will likely hold up the flow of revenue from gas fields for several more years, if not decades.

The two sides met last November to begin the arduous process of settling their territorial disputes with Prime Minister Alkatiri representing East Timor, and Alexander Downer, Australia's foreign minister, facing him across the table. The minutes of the meeting, which were meant to be private, were recently leaked and support the theory that Australia, and in particular Downer, is playing hardball.

"We don't have to exploit the resources," the transcript quotes Downer as saying. "They can stay there for 20, 40, 50 years. We are very tough. We will not care if you give information to the media. Let me give you a tutorial in politics -- not a chance."

Alkatiri said recently that East Timor isn't giving up without a fight, threatening that his country would claim the US$1.2 billion in royalties that Australia has already drawn from the Laminaria-Corallina oil fields, which lie much closer to East Timor than Australia (see map). The fields, which produce 50,000 barrels per day and are owned by Woodside, BHP Billiton, and Royal Dutch/Shell, were until recently Australia's biggest, although they are now in decline.

The relatively fast exploitation of Laminaria-Corallina is a concern to the East Timorese, who fear that with the boundary negotiations in limbo the Australians might accelerate the development of other disputed fields and deprive East Timor of its rightful revenues, a tactic Alkatiri describes as leaving East Timor with "the scrapings off the plate."

A statement issued last month by Alkatiri's office criticized Australia for awarding a new permit earlier this year for a field adjacent to the giant Greater Sunrise field, which again would belong to East Timor if an equidistant line were drawn between the two nations.

Woodside is also looking for US and Asian customers for gas from the Greater Sunrise gas fields. Although Greater Sunrise is not expected to begin production until 2010, Woodside said that it could be developed "sooner than expected."

"Australia wants to wait, since by the time a treaty is finally drawn up, most of [the ] Greater Sunrise [gas field ] will be depleted, by which time East Timor will have received only 18% of its total revenues," said an East Timorese working with a foreign oil company.

Since the two countries at their closest point are only 130 nautical miles apart, they are obviously both unable to jointly claim 200 nautical mile boundaries. The East Timorese say common sense dictates the simple expedient of drawing a median line in the Timor Sea between the two countries, equidistant to both. Australia has based its argument on both the premise that its nautical boundary should legally extend as far as its offshore continental shelf, and on the 1972 treaty signed with Indonesia, which earlier invaded and then annexed East Timor.

This line of argument has infuriated East Timor's delegation, particularly since the Australian government walked out on proceedings to decide the matter under the auspices of the UN's International Court of Justice in the Netherlands last year.

The stakes, according to some estimates, could be as high as $30 billion in oil and gas revenues over the next three decades. The two countries previously agreed to a temporary revenue sharing treaty -- the Timor Sea Treaty -- until a permanent boundary is agreed, a solution that gave most of the Joint Petroleum Development Agreement (JPDA) revenues to East Timor. But the JPDA only covers only a part of the disputed area.

"When the Australians negotiated the Timor Sea Treaty they basically rammed the whole thing through," said the source close to the Timorese negotiators. "But now when it's not in their interest to establish permanent boundaries they are stalling."

East Timor accuses Australia of exploiting oil reserves

ABC Radio PM program, 10 December 2003. Reporter: Graeme Dobell

MARK COLVIN: East Timor has accused Australia of acting unlawfully in exploiting oil reserves in the Timor Sea while negotiations are just starting on a permanent maritime boundary.

And East Timor's supporters say that Australia aims to pump out billions of dollars worth of oil while dragging out the talks for years, by having only two negotiating sessions per year.

The East Timor Foreign Minister Jose Ramos Horta was in Canberra today for talks on the conduct of the negotiations, as Graeme Dobell reports.

GRAEME DOBELL: Jose Ramos Horta says billions of dollars of resources are at stake and the argument with Australia is heating up.

JOSES RAMOS HORTA: People are very worried about the relationship, the conflict between ours and Australia because of oil, gas resources. I say ‘well, that's very natural.’ When there's a lot of money involved, husbands fight wives, wives fight husbands, particularly ex-husbands and ex-wives fight a lot over wealth, sisters and brothers fight. So we will probably have some tumultuous discussions in the next few months.

GRAEME DOBELL: East Timor's Foreign Minister says the negotiating style of Prime Minister John Howard and his Government is tough, whether you see it from a saintly or secular viewpoint.

JOSES RAMOS HORTA: He never pretends to be neither Tom Cruise or either Mother Teresa. He is what who he is, predictable. We know who we are dealing with, a very straightforward person, and obviously when it comes to billions of dollars that oil experts say exist in the Timor Sea, even if John Howard were Mother Teresa, he would hesitate in giving away what he actually believes belongs to his order.

GRAEME DOBELL: Behind the friendly tone, East Timor is laying out a set of arguments that are getting tougher, specifically that Australia is acting unlawfully by pumping oil from fills in the Timor Sea that Dili says actually belong to East Timor.

Indeed if a maritime boundary was set at the mid-point between Australia and East Timor that would be the case.

Dr Ramos Horta says that under international law Australia should refrain from exploiting resources until a permanent maritime boundary is negotiated.

JOSES RAMOS HORTA: It is our view that this fills, buffalo, Laminaria-Corallina, that have been operating under Australian licenses rightfully are part of East Timor sovereign rights.

GRAEME DOBELL: The first round of negotiations for a permanent maritime boundary began in Darwin last month.

East Timor says the talks are vital and the negotiators should continue meeting on a monthly basis.

Australia though says the formal negotiations should take place only twice a year.

The Convenor of the Australia East Timor Association Dr Andrew McNaughton, remembering that the previous Timor Sea negotiations with Indonesia took a decade, suggests that Australia could prolong negotiations for years while exploiting the disputed fields.

ANDREW MCNAUGHTON: Australia holds most of the cards. Australia has pulled out of the jurisdiction of the International Court, so Timor can't have the matter settled as matters stand in the International Court.

Australia has all the money. Australia has lots of other resources. Australia aids Timor, Timor doesn't aid Australia. So Australia has all the cards.

I believe Australia is in a good position to force a compromise upon East Timor.

My concern is that Australia may give no ground at all and might just say ‘look, we hold all the cards, bugger off. We don't care what international law says, we don't care what international conventions and rights say, we're not giving any ground and that's that.’

Mind the Timor gap

By Andrew Hewett (ANDREW HEWETT is executive director of Oxfam Community Aid Abroad)
(Melbourne) Herald Sun, 26 December 2003

GOVERNMENTS from around the world gathered in East Timor recently to hear news of a looming economic crisis facing the world's newest nation.

This crisis is triggered by declining foreign aid and uncertainty about future revenue flows to East Timor from the oil and gas fields of the Timor Sea.

When East Timor celebrated independence in May 2002, the huge challenge of economic and social development lay ahead. East Timor is the poorest country in East Asia. Only 60 per cent of its people can read and write, life expectancy is just 57 years and more than one-in-10 East Timorese children born today are likely to die before the age of five.

To confront these challenges, East Timor's paltry annual budget of $119 million relies heavily on foreign aid.

Most of this is set to decline rapidly over the next three years, leaving the country with an expected budget deficit of more than $195 million by 2007. While donor support for reconstruction has been generous since 1999, many donors are now scaling back support to help other countries such as Afghanistan, Iraq and Liberia.

Fortunately for East Timor there is a window of opportunity for financing its development needs over the coming decades -- lucrative undersea oil and gas reserves.

In the Timor Sea between Australia and East Timor lie vast reserves over which political tensions between Canberra and Dili are heating up.

Central to the tensions are the tens of billions of dollars worth of energy from an area of the Timor Sea that is subject to overlapping maritime boundary claims by the two countries.

With this sort of money at stake, the Australian Government claims that our maritime boundary extends to the edge of the Australian continental shelf -- 400km off our northern coast -- and, unsurprisingly, far closer to East Timor than Australia. Such an outcome to boundary negotiations would bring the bulk of revenue from the deposits into Canberra's rather than Dili's coffers.

East Timor claims that the maritime boundary should be drawn along a middle line between our coast lines.

Since the early 1980s, such median lines have been the preferred method for determining maritime boundaries between countries less than 400 nautical miles apart.

Normally, when a maritime boundary cannot be agreed by two countries, the matter would go to the International Court of Justice.

But when East Timor suggested having the matter adjudicated that way, the Australian Government withdrew from this dispute settlement procedure. This tactical manoeuvre, perceived by the East Timorese Government as an unfriendly act, has effectively removed any opportunity East Timor might have had for seeking an independent, third-party resolution.

So it is left with no legal mechanism to establish its boundaries in the absence of timely and co-operative negotiations with Australia.

Australia needs to assist this small nation to achieve financial independence.

The unfolding tensions over the Timor Sea risk undermining Australia's relations with our closest neighbour and tarnish the Howard Government's strongest foreign policy achievement in supporting the fledgling country over the past four years.

The people of East Timor deserve a fair go.

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua D. Alberto Ricardo, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
email: info@laohamutuk.org    Web: http://www.laohamutuk.org    Blog: laohamutuk.blogspot.com