Sydney Morning Herald Wednesday, August 30, 2000

Dili seeks more of oil profit

By JANE COUNSEL

Official negotiations for the new Timor Gap treaty will begin in earnest in October, amid expectations East Timor will be given a greater slice of revenue to underpin its economic recovery.

Several rounds of talks have already been held between the United Nations Transitional Administration in East Timor and officials from Australia's Department of Foreign Affairs and Trade, and both sides have made their views clearly known.

The East Timorese political leader Mr Jose Ramos Horta has called on Australia to renegotiate the treaty so 90 per cent of the estimated revenue of $A70 million or more from the Timor Gap flows to an independent East Timor.

Whether Australia will agree to that demand is still to be determined, but observers note that Foreign Affairs officials will be under pressure from the UN to give East Timor a share of revenue well above the current 50-50 split, to lessen the country's dependence on foreign aid.

There has also been talk that the geographical borders of the current Zone of Co-operation Agreement (ZOCA) between the two countries could be moved out to capture additional revenue from other oilfields located nearby.

Under the current treaty, Australia and East Timor draw their revenue from only two oil fields in the ZOCA, located in an oil-rich area in the middle of the Timor Sea, which flows between the two countries.

Several years out, however, the lion's share of ZOCA revenue will come from the $US1.4 billion Bayu-Undan gas field, scheduled to commence production of a gas recycling project in 2004.

But if Australia and East Timor were to agree to move the ZOCA borders, they could boost royalty income by tapping into other oil and gas projects, including the revenue-rich Laminaria and Corallina oilfields, which sit just outside the currently agreed zone.

The two oilfields, producing 140,000 barrels of oil a day, are a cash-cow for operator Woodside Petroleum, particularly on present oil prices of $US34 a barrel.

Australian Foreign Affairs officials, however, are understood to believe there is no technical basis to support a change in the ZOCA boundary.

A new treaty on the Timor Gap is necessary following East Timor's vote for independence from Indonesia.

The present treaty, signed between Australia and Indonesia in 1989, carved up the Timor Sea into three areas, creating the ZOCA zone in the middle, an Indonesian-administered zone to the north and an Australian-controlled zone to the south.

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