Agence France Presse

January 16, 2000, Sunday

Timor gap oil treaty under discussion in Dili

DILI, East Timor, Jan 16

East Timorese and international officials met Sunday to discuss a Timor Gap oil treaty that could be signed by the end of February.

The conference at a Dili hotel leased by the United Nations has attracted about 50 geologists, lawyers, engineers, economists and other experts from Australia, the United Nations, Portugal, Mozambique and East Timor.

"I think this is really the first serious discussion that Australia's had with the United Nations," John Kjar, a manager with the Australian Industry Science Resources department, told AFP Sunday.

In December 1989 Indonesia and Australia concluded a treaty over the Timor Gap, oil-rich waters between northern Australia and East Timor.

The treaty divides the Timor gap into three zones -- with Indonesia and Australia managing one zone each, with the third zone under joint administration.

Indonesia invaded the former Portuguese colony in 1975 and withdrew in October 1999 after militias, backed by the Indonesian armed forces, went on a campaign of destruction that left the territory with almost no housing, no businesses and no government infrastructure.

The UN Transitional Administration in East Timor (UNTAET) has been in place since October 25 and could sign a Timor Gap treaty with Australia within the next few weeks.

Kjar said the conference was a chance to discuss exploration in the area, its geology, and issues surrounding the treaty itself.

"It's really just an exchange of information between the parties," he said.

Future revenue and employment opportunities from the Gap are on the agenda.

"There will sort of be small amounts of money coming in over the next two years," Kjar said. "The bigger flows could commence about 2004 but that really depends on the treaty arrangements."

The exact revenue potential is hard to determine, he said.

Jose Ramos-Horta, a vice-president of the National Council of Timorese Resistance, attended the conference opening Saturday night, Kjar said. East Timorese members of the national consultative council, a type of cabinet for the territory, were also present.

International oil companies would address the gathering Monday and Tuesday.

Indonesia has said it will accept a review or a cancellation of the Timor Gap treaty it signed with Australia, but experts have said such a treaty will remain in force for a while, until a free state of East Timor is in operation.

Subject: Transcript: Timor Gap Oil a Cash Cow for E Timor

Australian Broadcasting Corporation The World Today - transcript Thursday, January 20, 2000 12:35 p.m.

Timor Gap oil a cash cow for East Timor

COMPERE: Well, as the violence continues across Indonesian territories, East Timor emerging from 25 years of Indonesian domination, stands to make hundreds of millions of dollars over the next couple of decades from oil and gas projects in the Timor Gap area. There are currently moves under way to ensure that East Timor replaces Indonesia as Australia's partner in the treaty which governs exploitation of these resources under the sea.

From Dili, Geoff Thompson reports:

GEOFF THOMPSON: More violence on the streets of Dili. This neighbourhood dispute yesterday saw hundreds embroiled in a rock-throwing clash which caused Kenyan INTERFET troops to fire shots into the air.

UNIDENTIFIED: Hasn't there been enough killing before?

GEOFF THOMPSON: A United Nations policeman expresses the exasperation which many UN workers are feeling here. Day after day now the frustration of East Timor's unemployed is spilling into violence. But if the East Timorese get through this very difficult transition to independence, they may get the opportunity to strike it rich.

East Timor is now Australia's partner in the potentially very lucrative oil and gas reserves in the Timor Gap's Zone of Co-operation. John Hartwell is the Timor Gap expert in Australia's Ministry for Industry, Science and Resources.

JOHN HARTWELL: The Zone up to this point has been extensively explored. It probably is fair to say that over the ten years that the Zone has been very much in the exploration phase and now there is the potential to go ahead with some development projects, but again we need to effect a smooth and seamless transition to our new partners.

GEOFF THOMPSON: Indonesia ceased to be a party to the Timor Gap treaty on 25 October last year when it cancelled it claim over East Timor. In effect, East Timor has inherited that treaty on the same terms. Most projects in the Gap are not expected to start producing for at least three years, but East Timor's leaders know the big money and new employment opportunities will start to flow soon.

Murray Alcaterie [phonetic] is East Timor's spokesman on the Timor Gap.

MURRAY ALCATERIE: My major concern now, right now is how to disengage Indonesia from this treaty itself. But, of course, we still hope that our Australian counterpart will succeed to do it very soon.

GEOFF THOMPSON: How much money do you hope the people of East Timor will make from the Timor Gap?

MURRAY ALCATERIE: We are told already that there's some hundreds of millions of dollars but, of course, it's better not to talk an amount of money now.

GEOFF THOMPSON: It is a lot of money for a small, fairly sparsely-populated new nation.

MURRAY ALCATERIE: I've no doubt on this. I hope now that this - it will help us too much to develop our project, to develop our economy.

GEOFF THOMPSON: Until East Timor achieves full independence, the UN's UNTAET administration will be the nominal partner to the Timor Gap Treaty. The UN's Jonathan Prentiss [phonetic] is handling the negotiations.

JONATHAN PRENTISS: It has the potential to be their most significant resource in the near future and indeed even into the mid-term, so we are taking it very seriously and are looking forward to a speedy and neat transfer of the treaty institutions over to UNTAET and East Timor so that the dividends from operations in the Zone of Co-operation can be reaped as from now.

GEOFF THOMPSON: We are talking about hundreds and hundreds of millions of dollars potentially over the next 20 years?

JONATHAN PRENTISS: Various figures have been floated around that are extremely significant, though we've been told by the experts that these depend upon a whole kaleidoscope of factors, any one of which can change. For example, we were told that only a year ago a barrel of oil was $10, it's now apparently $28, so it's factors like that can vary to our benefit or to our detriment but, yes, the figure is extremely sizeable, in the many, many millions.

GEOFF THOMPSON: There is great potential for the standard of living in East Timor to improve if those revenues do come on-line?

JONATHAN PRENTISS: Absolutely, and also there is great benefit to be accrued to East Timor in terms of training of East Timorese in all aspects of the oil industry, in the services to sustain an oil industry offshore in deep water. It is not just the revenues that will be coming in but it is everything to do with the industry that I think will be in great benefit to East Timor.

GEOFF THOMPSON: The future returns from the Timor Gap depend on multi-billion dollar development, encapturing markets for the Gap's vast reserves of gas and oil. Phillips Petroleum's Bijou Undanwell [phonetic] is the first big project expected to start producing gas resources.

Jim Goodlove is the Darwin area manager for the Phillips Petroleum company.

JIM GOODLOVE: Needless to say, there is - there are substantial resources out there and there are indeed substantial revenues to be shared between the contracting states. Let me do say that we have discussed the revenue potential of our project with Australia, the Timorese and the UN, so they are aware of the general magnitude of the revenues that they might expect.

GEOFF THOMPSON: Would it be fair to say that there would be very few other small half-island states with less than 900,000 people that would have access to the sorts of revenues that will be coming from the Gap?

JIM GOODLOVE: Well, obviously we think the Gap will provide a significant revenue stream to the new nation of East Timor. Now, how that relates to other nations of their size, it's really - I can't say, but we do think this will have a very material and a very beneficial effect to East Timor when it becomes independent.

GEOFF THOMPSON: I know you said you don't discuss revenues, but I understand that in the conference the figure of $800 million over 20 years coming back to East Timor was mentioned.

JIM GOODLOVE: I don't recall that number. I won't - just do not comment on revenue potential.

GEOFF THOMPSON: Is that wrong?

JIM GOODLOVE: I do not comment on revenue potential. The people who need to know, know.

COMPERE: Jim Goodlove is the Darwin area manager for the Phillips Petroleum Company of the United States, and our report from Geoff Thompson in Dili.

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