From The Australian Financial Review, 14 Dec 2000, p29 PUSH FOR MIDDLE LINE ON OIL by Kate Marshall

Push for middle line on oil 14/12/00 AFR News - 14.12.00 03:22

The United Nations transitional authority will meet Australian Government negotiators early next year for round two of its attempt to get them to agree to a fairer distribution of royalties from the Timor Gap oil and gas fields.

The UN staunchly refused to recognise Indonesian sovereignty over East Timor after the 1975 invasion and argues Indonesia never had the right to negotiate the treaty.

Peter Galbraith, a UN transitional authority cabinet member and former United States diplomat, is clearly confident that East Timor would have the force of international law on its side if the case ever came before the International Court of Justice.

Galbraith is said to have sought advice from the Norwegian State oil company, Statoil, which has had extensive experience dealing with seabed law principles in the North Sea.

Both Galbraith and the East Timorese leaders are pushing a proposed 90/10 split in favour of East Timor which, if accepted, would replace the existing 50/50 arrangement. East Timor received its first oil field royalty of about $5.6 million in October, based on a 50/50 split of the production revenue in the previous year.

The Australian Government has refused to disclose what it is prepared to concede, if anything, but the federal Opposition has had no such qualms. The Foreign Affairs spokesman, Laurie Brereton, is firmly in favour of reworking the treaty to give a future Timorese Government an equitable share of the royalties.

Brereton's spokesman, Philip Dorling, says a Labor government would be prepared to roll over the existing regime and modify the revenue distribution according to the median point between the two coastlines. The median line concept was foreshadowed in Inside Indonesia magazine by an oil industry consultant, Geoffrey McKee, in April and was subsequently referred to by the Timorese leaders and the UN authority in their negotiations with the Australian Government.

The Senate inquiry released last week reinforces the ALP's policy of supporting the establishment of a permanent seabed boundary based on equidistance.

If the Timorese chose, they could maintain the existing regime laid down in the treaty to change the distribution of royalties, giving them a 90 per cent take.

In theory, the oil producers - Phillips, Shell, Woodside, Santos, Petroz and Kerr-McGee - would be disinterested over the outcome because they retain their revenues no matter who is in government. In practice, though, sovereignty does matter to them because they worry about political stability.

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