Subject: E Timor Confident Of Saving Multibillion Dollar Gas Pipe

Associated Press, September 25, 2000

E Timor Confident Of Saving Multibillion Dlr Gas Pipe

DARWIN, Australia (AP) -- East Timor's new government aims to convince a consortium led by U.S. oil giant Philips Petroleum (P) to proceed with a multibillion dollar plan to pipe gas from the Timor Sea to Australia, East Timor's chief minister-elect said Tuesday.

Mari Alkatiri said he was confident that East Timor's newly elected Constituent Assembly will be able to persuade the Philips consortium to continue with the pipeline when negotiations recommence in two weeks.

Last month, Philips Petroleum and its joint venture partners deferred plans to build the pipeline because of a royalty dispute with the United Nations Transitional Authority in East Timor, which has managed the island's transition to independence from Indonesia.

The U.N. body will govern the fledgling nation until it gains full independence next year, but East Timor's first elected government is eager to take over negotiations in order to reach a deal.

"Now we have an elected government in East Timor that has a legitimacy to negotiate and it's easy for us to do it," Alkatiri told reporters during a visit to the north Australian port city of Darwin.

"We need to get the whole operation going; we need the money in two or three years from now but still we need a good deal for both sides," he added.

The 13 billion Australian dollars pipeline is expected to be completed in 2004. It will extend from the Timor Sea gas fields north of Australia to Darwin.

Under the Timor Gap deal, signed in July, East Timor was to receive 90% of the royalties from the oil and natural gas drilling, with the remaining 10% going to Australia. Over 20 years starting from 2004, East Timor had expected to receive more than US$3.6 billion in royalties.

Before East Timor became independent, Australia shared Timor Gap revenues 50-50 with Indonesia.

Alkatiri said Tuesday that revenue from the gas pipeline is important for his fledgling nation. Currently East Timor, which has a population of 800,000, has an annual budget of just A$130 million, he said.

"The main issue is how to eradicate poverty in East Timor in a very short time," he said.

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