Subject: DJ: E. Timor Determined To Ink Oil, Gas Pact With Australia-Min

Received from Joyo Indonesian News

E. Timor Determined To Ink Oil, Gas Pact With Australia-Min

SINGAPORE, April 25 -- East Timor's foreign minister Jose Ramos-Horta said Thursday he is "determined" his country will be able to sign a treaty with Australia to divide royalties from oil and natural gas reserves in the Timor Sea.

Finalization of the treaty has been "bogged down for many weeks" over the delineation of the western maritime boundary between East Timor and Australia, and over taxation negotiations between Australia and gas developer Phillips Petroleum Co. (P), he said.

The treaty was originally due to be signed May 20, the day East Timor becomes an independent nation. It is based on an interim agreement signed last year by Australia and East Timor's United Nations administrators.

"I am hopeful both sides will honor the agreement," and sign it soon after May 20, Ramos-Horta said. Australia's foreign minister Alexander Downer said last week that the signing could be delayed.

According to the treaty, East Timor gets 90% of the royalties from the Bayu Undan oil and gas field, while Australia receives 10%. But East Timor negotiated an additional US$150 million from Phillips, which Phillips in turn wants to offset with tax concessions from Australia.

"Phillips..is trying to squeeze as much as it can from Australia. But we squeezed as much as we could from Phillips," Ramos-Horta said.

Also at issue is the maritime border. If resolved in East Timor's favor, this would increase its share of royalties from the Sunrise field that spans Australian and East Timorese waters. Currently, East Timor is to receive 18% of royalties from that field.

Ramos-Horta said his government has no preference in a dispute between Phillips and the Royal Dutch/Shell Group (RD), over how to develop the Sunrise gas. Phillips wants to pipe it to Australia, while Shell hopes to market liquefied natural gas from a floating liquefaction facility.

Woodside, with a 33.4% stake in Sunrise, is backing the Shell plan as being the most economic and lucrative, and is supported in its view by Japan's Osaka Gas Ltd. (J.OSG) with 10%. Shell holds 26.6% and Phillips 30%.

East Timor, which has almost no sources of income beyond assistance from donor nations, will rely heavily on its oil and gas revenues.

Ramos-Horta said the country's annual budget, of about US$70 million, will be used to create infrastructure and develop a civil service, as well as fund education and medical needs.

-By Lucy Hornby, Dow Jones Newswires; 65-6415-4065; lucy.hornby@dowjones.com


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