TIMOR SEA FACT SHEET I

Timor Sea Office February 2003

The Timor Sea Treaty

On 20 May 2002 the Timor Sea Treaty was signed by the Prime Minister of Timor Leste, Mari Alkatiri, and the Prime Minister of Australia, John Howard. Under the Constitutions of both Timor Leste and Australia, the Treaty needs to be ratified by both Timor Leste and Australia before it can enter into force. On December 17 2002, the Timor Sea Treaty was ratified by Timor Leste National Parliament with a vote of 65 in favor and 13 against. In a report by the JSCOT (Joint Standing Committee on Treaties) to the Australian parliament on 11 November 2002, it was recommended that the treaty be ratified by the Australian Parliament. The Australian Government is yet to ratify the Treaty.
Under the Treaty, Timor Leste will receive 90% of oil and gas production in the Joint Petroleum Development Area (JPDA) while Australia will receive 10%. A map of the JPDA is attached to this Fact Sheet and can be seen in a separate window by clicking the small map at right.
The Treaty, once it enters into force, will replace the regime which was first instituted by the February 2000 UNTAET-Australia Exchange of Notes, and which was continued, on a temporary basis, on 20 May 2002. UNTAET, the United Nations Transitional Administration in Timor Leste, concluded the Exchange of Notes with the advice of the leaders of Timor Leste.
The February 2000 Exchange of Notes continued the terms of the 1989 “Timor Gap Treaty” between Australia and Indonesia for the period of Timor Leste’s transition to independence.
In another Exchange of Notes of 20 May 2002, the Governments of Timor Leste and Australia agreed that the Treaty was suitable for immediate submission to their respective ratification processes, and agreed to work expeditiously and in good faith to have the Treaty enter into force.
Bayu-Undan is the most significant petroleum deposit in the JPDA. Under the terms of the Treaty, Timor Leste will receive 90% of production from the Bayu-Undan field, because it lies entirely within the JPDA.
The Greater Sunrise field, which lies across the JPDA boundary, will be “unitised” on the basis that 20.1% lies in the JPDA and 79.9% is outside the JPDA and is apportioned to Australia. Therefore, if Greater Sunrise goes into production as a unitised field under the Treaty, Timor Leste will receive 90% of 20.1% of Greater Sunrise production.

‘Unitisation’ refers to the process by which a petroleum deposit, which lies across an international boundary or the boundary of a contract area, is treated as one single unit for purposes of technical and commercial development and, as far as possible, for regulatory, administrative and fiscal purposes: See Fact Sheet II on the International Unitisation Agreement.

The Treaty text was agreed on 5 July 2001, before Timor Leste’s independence, when representatives of UNTAET/Timor Leste and Australia initialed the ‘Timor Sea Arrangement’. The Arrangement recommended the Treaty text as suitable for adoption by the Government of an independent Timor Leste. The negotiating team for the Treaty text included Timor Leste leaders, United Nations officials and their advisors.
The Treaty provides for the continuation, with certain agreed modifications, of contracts held by companies under the 1989 Treaty for the Bayu-Undan field and Greater Sunrise field. Bayu-Undan is operated by ConocoPhillips (formerly Phillips Petroleum). The operator of Greater Sunrise is Woodside Australian Energy. See Fact Sheet III on the Bayu-Undan Development.
The estimated benefit to Timor Leste from the full Bayu-Undan development (on the basis of petroleum which has already been proved to exist) is around $US 3 billion over the life of the field, likely to be 17 years. The current annual expenditure budget of Timor Leste is $US 77.7 million.
The JPDA is a temporary petroleum revenue area. The Treaty states clearly that it is without prejudice to a final maritime boundary between Timor Leste and Australia. The Treaty terminates once there is a permanent delimitation between Timor Leste and Australia.
On 20 May 2002, prior to the signing of the Treaty, Prime Minister Alkatiri declared in the first sitting of National Parliament that the Treaty is an interim administrative arrangement for the development of petroleum resources and is not a maritime boundary delimitation. Legal advice received by Timor Leste from some of the world’s most prominent maritime boundary lawyers have confirmed that the Treaty will not hinder Timor Leste in obtaining maritime boundaries consistent with international law. See Fact Sheet IV on maritime boundaries.

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