Sydney Morning Herald May 3, 2001

Pressure mounts for new accord on seabed carve-up

By Hamish McDonald, Foreign Editor

Negotiators for Australia and East Timor yesterday began a secrecy-shrouded meeting in Brisbane in the search for agreement on the seabed boundary in the Timor Sea, after a month of escalating pressure tactics by both sides.

These have included warnings that some $15billion in gas-based investments could "evaporate" unless a new regime is quickly agreed to replace the Timor Gap Treaty signed in 1989 between Australia and Indonesia, then occupying the territory.

The Northern Territory Government, oil companies with discoveries in the disputed area, and the US Embassy have all added to the sense of urgency.

Phillips Petroleum this week said it needed an agreement by early June if it is to meet its end-of-July deadline to enter a final contract for construction of a 500-kilometre undersea pipeline from its Bayu-Undan field to Darwin, from where gas will be liquefied for export to the US and piped to industrial customers in Australia. Other fields are likely to connect to this pipeline.

"We have taken Timor Sea gas to the threshold of development," said Phillips's manager in Darwin, Jim Godlove. "For us to go across the line, we require governments to provide us with legal and fiscal certainty."

The tension follows a blunt speech to an oil industry conference in Hobart on April9 by one of the chief negotiators for the East Timor side, Peter Galbraith, who is head of political affairs in the territory's United Nations transitional administration.

Mr Galbraith pointed to "compelling claims" under maritime law for East Timor's ownership to be extended over much more of the oil and gas discoveries in the Timor Sea, within the "Timor Gap" itself and by extension of its side boundaries.

Such wider ownership could lift East Timor's revenue flow to $US345million ($666million) a year. In addition, he indicated that East Timor wants to be in a position to influence the tax regime, and that the pattern of developments at present gives all downstream benefits to northern Australia.

The Timorese had fought Indonesian occupation for 24 years. Without a treaty based on international law, he said, "the East Timorese are prepared to wait patiently for their rights".

Although both sides are keeping their positions secret, it is known that East Timor asserts seabed ownership out to the median line between the two opposing coasts, while Australia continues a claim to ownership to the end of its continental shelf, which it puts in the 2,000-metre-deep trench running close to Timor's coast.

In the Timor Gap Treaty, a compromise between similar positions set up a "zone of co-operation" over the disputed area, administered by a joint authority and with government revenues shared equally between Australia and Indonesia.

So far in negotiations with East Timor since last October, Canberra has insisted on keeping this arrangement, but is thought to have modified its proposed revenue split to 80:20 in Dili's favour.

Since this speech, Mr Galbraith, formerly senior staffer on the US Senate Foreign Relations Committee and US ambassador in Croatia, has been singled out for personal attack as a "moral zealot" prepared to mislead the East Timorese into believing that investment for the Timor Sea will always be on tap while they argue a principle of maritime law for up to 24 years.

Responding to one press commentary on this line, Mr Galbraith remarked last week to one associate that "this piece is in a category with those I encountered in the wartime press in the Balkans".

A senior oil industry consultant said yesterday the negotiations had reached a critical stage with Mr Galbraith's speech and the responses. "It's all guns out to get the best deal," he said, adding that the East Timorese had the right to seek the best bargain they could.

The attacks on Mr Galbraith and "alarmism" were predictable and aimed at countering sympathy for the East Timor case in Australian public opinion. The Federal Opposition and a Senate committee had supported a new treaty giving East Timor 90per cent of revenues from disputed zones.

"Everyone knows that rationally these projects will go ahead, because there is so much sunk capital in them and the engineering is all under way," the consultant said.

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