Subject: SMH: UN takes tough line on Timor Gap negotiations

UN takes tough line on Timor Gap negotiations

By Michael Weir

East Timor has turned up the heat on the Australian Government to squeeze a better deal from the Timor Sea's oil and gas riches.

Mr Peter Galbraith, a United Nations appointee who is Political Affairs Minister in the temporary administration, said yesterday the Timor Sea was "closed for business" until a new treaty to determine tax and revenue sharing was negotiated.

Mr Galbraith pulled no punches at the annual Australian Petroleum Production and Exploration Association conference in Hobart, declaring the old Zone of Cooperation Agreement did not legally or technically exist.

He said because Indonesia had illegally occupied East Timor when the Gap treaty was drawn up, it carried no weight and the existing boundaries did not exist.

Meetings were held in Melbourne last week with no outcome and Mr Galbraith has set a deadline of July 15 for an outcome, or the negotiations would get bogged down in both East Timor and Australia's elections.

The situation comes at a critical time in the development of the Timor Sea, with projects worth more than $10 billion already on the drawing board. These include the Bayu-Undan and Greater Sunrise gasfields, a liquefied natural gas plant in Darwin and the Methanex methanol plant, also in Darwin.

Many in corporate and government circles had thought East Timor would continue with the old agreement and have been shocked at the tough stance being taken by the interim administration.

Mr Galbraith said the Woodside-managed Laminaria project, operating under Australian licence but in an area to which East Timor has a compelling claim under international law, could generate tax and royalty revenues of up to $365 million for the new nation, compared to its current annual budget of $90 million.

He said that, in regard to existing developments, the future fiscal and regulatory framework would be no more onerous than when Indonesia pulled out of East Timor. What was at issue was how the revenue and royalty pie was divided up.

Under the current arrangement it is shared 50:50. The intensity of the latest push by East Timor has some suggesting a new treaty could be as much as 90:10 in favour of East Timor.

"As significant as the revenues will be for East Timor, the amounts pale in comparison to the downstream benefits accruing to Australia, and in particular the Northern Territory, from the development of East Timor's gas," he said. "The East Timorese leadership promise a new framework that will be modern, stable and more business friendly."

Resources minister Senator Minchin said yesterday the Australian Government was prepared to be "generous" in relation to its revenue sharing with East Timor.

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