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East Timor Pushes for Sunrise Gas Decision

International Oil Daily
January 26, 2004

The government of East Timor is trying to interest the owners of the Greater Sunrise gas project in the Timor Sea to build a liquefied natural gas terminal East Timor -- on the grounds that the country lies only about 150 kilometers from the offshore fields, compared with the roughly 500 km that gas would have to be piped if the LNG receiving plant were to be built in the northern Australian city of Darwin.

Greater Sunrise is owned by Australia's Woodside, Royal Dutch/Shell, US major ConocoPhillips and Japan's Osaka Gas

"We're trying to encourage the companies to at least look at the possibility of whether it would be more economical to build it in East Timor," said a source in the East Timorese government. "We're not going to push for it if it doesn't make financial sense; this would ultimately affect East Timor's revenues from the JPDA [Joint Petroleum Development Area ]."

Buoyed by talk of selling Australian gas to US markets, operator Woodside is again pushing for development of Greater Sunrise, after earlier disputes with Conoco over whether to pipe the gas to Australia or build the world's first floating LNG operation at the site. All the partners except Conoco favor the floating LNG plant.

Under its plan for development of gas reserves at the Bayu-Undan field in the Timor Sea, Conoco will build an LNG plant in Darwin (IOD Jun.17,p8).

The East Timorese source said that to his knowledge the companies have never looked at the possibility of building an LNG receiving terminal in East Timor. Woodside was unavailable for comment on Monday due to a national holiday in Australia. The source said that East Timor badly needs more petroleum industry-related jobs to develop its economy. Currently some 68 East Timorese work for Conoco at Bayu-Undan, which is set to go into commercial production later this year, starting with condensate and other liquids.

Woodside said last week that it hopes to begin design work for the multibillion-dollar LNG project at Sunrise, which would hopefully translate into beginning production in about five years, provided the consortium can find customers and figure out whether to build the floating LNG facility or install pipelines.

The East Timor source said that Woodside has been in discussions with the government there, and that their relationship isn't characterized by the tetchiness that exists between the governments of East Timor and Australia over establishing a permanent boundary between the two countries.

East Timor is keen to see development begin in the JPDA since it will receive 90% of revenues from the area, which only accounts for 18% of the entire Greater Sunrise field. The East Timorese argue that if a median line were drawn between the two countries, all of Greater Sunrise would belong to East Timor.

The source said that representatives of the two governments will meet in East Timor's capital, Dili, in April to begin "serious negotiations" over a permanent maritime boundary, although a schedule has yet to be set for finalizing the discussions. Once the issue has been settled, all interim agreements like the JPDA will become null and void, he said.

A study by the owners of Greater Sunrise in 2002 determined that there is not sufficient industrial demand in northern Australia to warrant the construction of a pipeline from Greater Sunrise to Darwin. Woodside owns 33.4% of Sunrise, with Shell holding 26.6%, Conoco 30% and Osaka Gas 10%. Conoco argues that industrial demand in northern Australia is irrelevant, since it expects to begin shipping LNG from Darwin to Japan in 2006.

"What's driving Woodside are good market opportunities, particularly in the United States where the government seems keen to source gas from Australia," said the source in East Timor, noting that US Energy Secretary Spencer Abraham was in Australia recently to talk with potential suppliers of LNG. Woodside partner Osaka Gas could also presumably drum up some sales for Sunrise gas in Japan.

James Irwin, Singapore

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East Timor lobbies for Greater Sunrise gas onshore

By Joanne Collins

PERTH, Feb 24 (Reuters) - Tiny East Timor is lobbying developers of the A$6.6 billion ($5.12 billion) Greater Sunrise gas project to send natural gas onshore for processing in the impoverished nation instead of sending it to Australia, a Dili government official said.

"The prime minister of Timor Leste, Mari Alkatiri, has met with the project's operator, Woodside Petroleum, and asked that they do a feasibility study on bringing the gas onshore and they agreed,'' Jose Teixeira, East Timor Secretary of State for Mineral Resources and Energy, told Reuters on Tuesday.

Bringing Greater Sunrise gas onshore East Timor for processing into liquefied natural gas (LNG) for export would put millions of dollars into the newly independent nation's coffers and create much-needed employment.

The half-island nation is relying on oil and gas revenues to help rebuild the economy after a 1999 vote to breakaway from 24 years of Indonesian rule led to widespread violence that left it in ruins.

Greater Sunrise, lying around 450 km northwest of the Australian city of Darwin and 150 km south of East Timor, contains an estimated 8.3 trillion cubic feet (235 billion cu metres) of gas and 300 million barrels of condensate.

Operator Woodside Petroleum said the project's joint-venture partners were still assessing whether to bring the gas onshore or process it at sea in what would be the world's first floating liquefied natural gas facility.

"In the last 12 months we've revisited all the engineering work because the venture had differing views internally on floating versus onshore, so we really needed to bring that to a head by putting firm technical data in front of the venture,'' said Keith Spence, Woodside's acting chief executive officer.

"A decision will be made within months,'' Spence told Reuters in an interview.

LNG sales contracts

The venture seeks to pitch most of the project's vast gas reserves to Asia. But Australian-based Woodside said marketing the LNG would prove difficult until the Australian and East Timor parliaments ratified a pact mapping out the field's boundaries in the resource-rich Timor Sea.

"This is probably the biggest issue for us because in terms of getting a contract in the market place we need to have some fiscal certainty and that... agreement is the first step to get to the point where we can go to the market and say we have secure title over this resource,'' Spence said.

First commercial LNG production from Greater Sunrise is not scheduled to begin until 2010, but Spence said the project's partners wanted to pin down some preliminary deals this year.

"We've said to ourselves that 2004 is the year for us to really make the big step forward on Sunrise in the sense of really trying to bring a customer to the project,'' he said.

Australia and its northern neighbour, East Timor, signed a temporary revenue-sharing treaty last year for some oil and gas fields that will stay in place until a permanent maritime boundary is agreed.

The treaty splits revenues 90:10 in favour of East Timor from a shared 62,000 sq km (24,000 sq miles) region.

But a separate arrangement needs to be reached for the Greater Sunrise project because 20 percent of it lies in the treaty area and 80 percent in Australian waters.

Spence said he was optimistic the agreement would be ratified but said that East Timor was seeking better terms with Australia.

"I guess at the moment they want to see a bit more tangible commitment to negotiating from the Australian government on the boundary before they will actually move forward, so they are just trying to maximise their leverage,'' he said.

Woodside has a 33.44 percent interest in the project, ConocoPhillips has 30 percent, Royal Dutch/Shell has 26.56 percent and Osaka Gas the balance.

Woodside is 34 percent owned by Shell. Woodside shares closed at A$15.30 on Tuesday, up A$0.05.

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Woodside Studies East Timor Pipeline For Sunrise Gas

Dow Jones Newswires, March 10, 2004.   By STEPHEN BELL

PERTH -- Potentially giving an economic fillip to one of the world's newest and poorest nations, Woodside Petroleum (WPL.AU) said Wednesday that it may build a 150 kilometer pipeline to East Timor as part of its multibillion dollar Sunrise gas project.

The new plan, an alternative to two existing proposals, could bolster East Timor as it seeks a radical readjustment of maritime boundaries with its neighbor Australia.

A Woodside spokesman told Dow Jones Newswires that the company is looking at three alternatives for Sunrise consisting of a floating liquefied natural gas (LNG) facility, piping gas to an LNG facility in East Timor, or a pipeline to a Darwin-based plant.

"We aim to take one of these options into the basis of design phase for the project by the end of the year," he said.

Sunrise partners Royal Dutch/Shell Group (RD) and Woodside have previously backed floating LNG for Sunrise, while U.S. partner ConocoPhillips (COP) has argued in favor of a pipeline to Darwin.

ConocoPhillips is separately building a US$1.5 billion LNG plant at Darwin as part of its Bayu Undan project. Woodside has said previously that there are "possibilities for sharing infrastructure onshore" if Sunrise gas is landed at Darwin.

East Timor is only around 150km from Sunrise, much closer than the 450km-500 km distance to Darwin.

But East Timor lacks supporting infrastructure and skilled labor, and is viewed by analysts as a higher-risk site for a major LNG facility.

Woodside is eager to finalize a development plan to capture a rising demand for LNG imports in the U.S., along with the company's traditional markets in Asia such as China and Japan.

Japan's Osaka Gas Co. (9532.TO) owns 10% of the 7.7 trillion cubic feet Sunrise field and has been identified by Woodside as a potential LNG customer. Woodside has 33.4% of the project, ConocoPhillips has 30% and Shell has 26.6%, and Osaka Gas with 10%.

Whichever option is chosen, the design phase will likely take around 14 months, leading to a potential go-ahead for construction in 2006. LNG exports could start in 2009/10.

Pipeline Could Boost East Timor Boundary Case

Any move to pipe Sunrise gas to East Timor could bolster the country's claim that current seabed boundaries are invalid.

Under an interim Timor Sea Treaty between Australia and East Timor, Sunrise's reserves are split roughly 80% Australia and 20% to a Joint Petroleum Development Area.

The treaty provides for East Timor, which gained its independence in May 2002, to take a 90% share of royalties in the joint zone.

But East Timor argues that a boundary should be drawn midway between it and Australia, a shift that would place Sunrise and Bayu Undan wholly in East Timor waters.

 The debate comes amid court action by a small U.S. petroleum company that is seeking US$10.5 billion in damages over oil and gas rights that were allegedly granted in the 1970s when East Timor was a Portuguese colony.

The U.S. suit filed by Oceanic Exploration Co. (OCEX) against ConocoPhillips and the governments of Australia, Indonesia and East Timor alleges "theft, misappropriation and conversion" of oil and gas resources. Oceanic said the defendants violated U.S. antitrust and racketeering laws in a series of events over the past 30 years.

In Australia, meanwhile, the so-called International Unitization Agreement (IUA) for Sunrise, was passed Wednesday by the lower house of Australia's parliament.

A spokeswoman for federal industry and resources minister Ian Macfarlane said that the IUA was approved by the House of Representatives and is now before the Senate.

"We'd hope to get it through the Senate this sitting session, which finishes late March, because the Sunrise partners want to start work on a development," she told Dow Jones Newswires.

Yet to be approved by the government of East Timor, the IUA is meant to provide certainty to the Sunrise partners over taxation and other fiscal terms.

"The IUA creates the framework in which the joint venture can proceed with an investment decision while the governments continue to resolve the border issue," the Woodside spokesman said.

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