Sydney Morning Herald April 13, 2002

Canberra's 'unfriendly act' over gas field irks Timorese

By Hamish McDonald, International Editor in Dili

A last-minute dispute has blown up over the treaty that will unlock oil and gas resources worth billions of dollars in the seabed between Australia and East Timor, and the new nation's likely prime minister has accused Canberra of mistrust and an "unfriendly act".

Tension has been created by a new demand Canberra has placed on East Timor to speed up negotiations covering a rich natural gas field at the side of a joint development zone where the two nations share petroleum revenues, as agreed in a draft treaty last July.

In addition, East Timor's leaders and advisers have been taken aback by the Australian Government's sudden announcement last month that it would no longer accept the jurisdiction of the International Court of Justice in The Hague and another specialised tribunal over maritime boundary claims.

Mari Alkatiri, who heads the cabinet in the United Nations administration and is expected to be prime minister when East Timor becomes independent on May 20, yesterday sharply criticised the decision to withdraw from the court's jurisdiction. "I have been saying that I would like to ratify the [Timor Sea] agreement on May 20," Mr Alkatiri said.

"But I have also been saying that the agreement should not compromise East Timor's position and that we will approve legislation on the basis that our maritime frontiers are very clear. And the withdrawal of Australia from the International Court at The Hague is in our opinion a sign of a lack of confidence in us, and an unfriendly act."

Mr Alkatiri said East Timor was "quite ready" to ratify the treaty, but not its annex covering the division of revenue from the Greater Sunrise gas field straddling the eastern boundary of the joint development zone.

Greater Sunrise is a gas reserve of 9.5 trillion cubic feet controlled by a consortium of Woodside Petroleum, Phillips Petroleum, Shell and Osaka Gas. Under Annex E of the Timor Sea draft treaty it is deemed to lie 80 per cent in Australia's resource zone and 20 per cent in the joint zone.

This means that under the 90:10 revenue split in Dili's favour in the joint zone, East Timor will get 18 per cent of total government tax revenues from Greater Sunrise, which are likely to total tens of billions of dollars over 50 years from the opening of the field late this decade.

Australia has said that until Annex E is elaborated in a full "unitisation" agreement covering Greater Sunrise it will not agree to the whole Timor Sea treaty coming into force.

This position means that East Timor, which has virtually no other large-scale revenue prospects aside from foreign aid, would have to wait until the Greater Sunrise deal is locked up before getting any tax flows from Timor Sea oil fields.

UN officials are upset at what one called "this new and unreasonable demand", and say that full agreements are highly technical and take up to three years to pin down.

[Note: MOU on Timor Sea Arrangements between Australia and the UN & Timor (July 5 2001 can be found http://www.austlii.edu.au/au/other/dfat/special/MOUTSA.html]

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