Media Release:

Timor-Leste receives $644,000 from USTDA for petroleum sector

Dili, 02 March 2004

The U.S. Trade and Development Agency (USTDA) signed an agreement today with the Government of Timor-Leste for a $644,000 grant for technical assistance to the petroleum sector. This grant constitutes the second phase of USTDA funding.

"We are very grateful for the sustained support of the USTDA to the development of our petroleum sector", Prime Minister Alkatiri said today. Minister of Planning and Finance Madelena Boavida also thanked the USTDA, emphasizing the importance of their support: "Petroleum revenues will be crucial to Timor-Leste's economic independence."

The USTDA has indicated that it will also consider funding further technical assistance for the development of other industries and infrastructure projects in Timor-Leste as such opportunities arise.

Timor-Leste negotiations relating to Bayu-Undan and USTDA Phase I

The successful start of the US$1.8 billion Bayu-Undan liquids project last month (February 10, 2004) in the Timor Sea highlights Timor-Leste's ability to offer a stable and attractive investment regime to major corporations.

This investment came about because Timor-Leste was able to successfully negotiate not only an international legal regime governing certain parts of the Timor Sea, but also commercial and fiscal arrangements governing petroleum sharing and development with ConocoPhillips (the Bayu-Undan operator) and its joint venture partners.

USTDA was able to support the success of this investment through its petroleum sector technical assistance of $462,825. According to current estimates, the Bayu-Undan field will yield over $3 billion to the government of Timor-Leste over the next 20 years. This assistance complimented technical assistance of $446,600 contributed by the United States Agency for International Development in 2002.

Timor-Leste as a petroleum investment and LNG processing destination and USTDA Phase II The current Phase II of USTDA funding will provide assistance in the creation and implementation of a petroleum investment regime for Timor-Leste, including regulatory and fiscal laws, as well as in the promotion of Timor-Leste as a gas processing destination.

Timor-Leste is currently in the process of drafting regulatory and fiscal laws that will govern the exploration for, and exploitation of, petroleum. With the assistance of USTDA-funded Gaffney Cline, the drafting group for these laws is considering petroleum regimes in other countries, with a view to creating a regime for Timor-Leste that is internationally competitive. A regulatory and fiscal regime is being created that permits both flexibility in the authorization process and the establishment of a secure, contractually enforceable, basis for the large investments required in petroleum exploration and development, with disputes between the regulatory authorities and petroleum investors to be settled by binding, international arbitration.

Timor-Leste is not only looking at the upstream, but also at the downstream. It is encouraging companies to bring gas onshore to Timor-Leste in a socially and environmentally responsible manner. Timor-Leste needs the jobs and economic stimulus that a large onshore LNG processing facility will create. In return, Timor-Leste can offer certain benefits to foreign investors, including potential financing from international lending institutions that is available to projects only in developing countries.

The Prime Minister of Timor-Leste, Dr. Mari Alkatiri, has asked the Greater Sunrise joint venture partners to give serious consideration to the option of taking Sunrise gas to Timor-Leste for LNG processing. Woodside, the field operator, has confirmed that they will do so as part of the agreed process of finalizing the field development plan.

USTDA assistance will enable Timor-Leste to retain petroleum experts to advise it on the quality of this study.