Australian Associated Press June 6, 2001

Timor Gap revenue split remains unresolved: DFAT

By Karen Polglaze, Diplomatic Correspondent

CANBERRA - The revenue split between Australia and East Timor over oil and gas reserves in the Timor Sea remained unresolved, the Department of Foreign Affairs said today.

East Timor has rejected an Australian offer for 85 per cent of royalties from oil and gas production in the area of sea known as the Timor Gap to go to the newly-emerging nation.

Interim East Timor economics minister Mari Alkatiri has said Australia should accept a lower share of royalties than 15 per cent.

Despite an improvement in the progress of negotiations between the two nations over a new treaty, the revenue split remains an unresolved issue, DFAT first assistant secretary David Ritchie said.

"There are a number of areas that are still subject to finalisation in negotiations," Mr Ritchie told a Senate estimates committee.

"Revenue split is one, but there are a number of others."

Australia and East Timor were negotiating a package deal for a new treaty which would be signed once East Timor had established its first government which will follow elections scheduled for August 30.

Mr Ritchie would not be drawn on the detail of the negotiations, saying they were very complex, but said a preliminary agreement should be finalised next month.

"After a rocky start we've made some very substantial progress in those negotiations and we hope to be in a position ... to approve a framework agreement for the Timor Sea, probably in early July," he said.

The difficult issue of a sea-bed boundary has been resolved, but there are outstanding areas such as employment for East Timorese workers.

The July deadline has been demanded by prospective gas-field developer Phillips Petroleum.

The Timor Gap Treaty between Australia and Indonesia was signed in 1989 by the then foreign ministers of the two nations - Gareth Evans and Ali Alatas.

After East Timor voted for independence from Indonesia in 1999, the United Nations Transitional Authority in East Timor collected royalties that had previously gone to Indonesia under the treaty's 50:50 arrangement.

While oil royalties total only a few million annually, exploration suggests gas reserves are considerably larger and should net East Timor more than $100 million a year if exploited.

Several large companies have indicated they are interested in exploiting the reserves.

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