Sydney Morning Herald March 27, 2002

Timor gas billions all at sea

By Hamish McDonald, International Editor

Australia yesterday announced it would no longer submit to international legal rulings on maritime boundaries - after leading lawyers advised East Timor that Canberra was poised to rob it of tens of billions of dollars in oil and gas revenue.

The Attorney-General, Daryl Williams, and the Foreign Minister, Alexander Downer, said Australia would henceforth exclude maritime boundaries from compulsory dispute settlements in the International Court of Justice - the "World Court" sitting at The Hague - and the International Tribunal for the Law of the Sea.

The statement came after a weekend seminar in Dili heard expert legal advice that East Timor should own most of the biggest natural gas fields so far discovered in the sea, including the huge Greater Sunrise resource being developed by Woodside, Shell, Phillips and Osaka Gas.

The former head of the United States oil company Unocal, John Imle, also disputed the widely accepted view that the deep Timor Trench, north of these fields, blocked a pipeline to East Timor.

This view has been the basis of plans to land the gas near Darwin, giving billions of dollars in industrial spin-offs to Australia.

East Timor may be offered the funds to mount a case at the World Court by a US oil company, PetroTimor, which has a separate dispute with Canberra over offshore oil concessions.

The prospect has rung alarm bells in the Federal and Northern Territory governments, although the offices of Mr Williams and Mr Downer denied yesterday's decision was linked to the Timor Sea issue, and had been considered "for quite some time".

The ministers said "Australia's strong view is that any maritime boundary dispute is best settled by negotiation rather than litigation".

It is not clear, however, that Canberra has evaded a World Court case. A lawyer advising PetroTimor, Ron Nathans of the Sydney law firm Deacons, said the announcement did not mean Australia was immediately out of the court's ambit.

"Australia is not out of it today," Mr Nathans said. "Australia cannot just walk away."

The advice has also caused consternation in East Timor, which has been getting ready to sign a petroleum development treaty with Australia, based on current boundaries and giving a revenue split in the joint zone of 90:10 in Dili's favour, almost as soon as it attains independence.

East Timor's chief negotiator, Mari Alkatiri, who is likely to be the new nation's first prime minister, has flown hurriedly to London with a UN legal officer to seek urgent advice.

Mr Nathan said although the draft treaty with Australia, agreed by negotiators last July, set aside any boundary disputes, it could be seen as acquiescence in claims by parties affected by a future attempt to change the boundaries.

The Dili seminar heard advice from two international law experts, Professor Vaughan Lowe of Oxford University and the Sydney barrister Christopher Ward, that current maritime law would swing the lateral boundaries of East Timor's offshore zone to the east and west, giving it at least 80 per cent of the Greater Sunrise fields and potentially 100 per cent - as opposed to the 20 per cent under present boundaries.

A leading oil and gas engineer, Geoffrey McKee, said that over the economic life of Greater Sunrise - 2009 to 2050 - such changed boundaries would give East Timor up to $US36 billion ($68 billion) more in government revenue than the $US8 billion it can now expect. Australia's share would shrink from $US28 billion to nothing.

East Timor could expect to add almost $US4 billion more from the small Laminaria/Corallina oil fields on the western side of the joint zone, and from the Bayu-Undan field inside the zone.

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