Top Financial News Wed, 17 Jan 2001, 5:01pm EST

Australia May Forego A$70 Mln in Timor Gap Oil Fees, Paper Says By Dudley White

Melbourne, Jan. 17 (Bloomberg) -- The Australian government may give up the right to A$70 million ($39 million) a year in oil and gas royalties from the Timor Gap under a proposal to be considered next month, the Australian Financial Review reported, citing government sources.

The proposal, to be put before the federal Cabinet, follows talks between Australia, East Timor and the United Nations about the royalties, which since 1989 have been split on a 50-50 basis, the newspaper said.

The UN currently runs East Timor through the UN Transitional Administration, UNTAET. It is expected to remain in control of the country until an independent government is established in elections due by the end of this year.

Among the projects under development in the Timor Gap is Phillips Petroleum Co.'s Bayu-Undan field, which has oil and gas reserves worth about $30 billion. The sea is jointly administered by Australia and East Timor.

Production payments on oil and gas from the Timor Gap, off Australia's northern coast, are expected to rise to A$140 million by 2004 from A$6 million in 2000, the Financial Review reported.

Australia is believed to have offered a 40-60 split in East Timor's favor, though the newly formed nation is arguing for a 90- 10 division, the newspaper said.

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