Also: Timor gas treaty troubled

The Australian May 03, 2002

Timor treaty spat grows

By Nigel Wilson

THE East Timor leadership reacted strongly yesterday to suggestions it was holding up the signing of a treaty covering Timor Sea gas reserves.

Instead, highly placed East Timor officials said delays threatening the proposed treaty signing on May 20 should be sheeted home to Australian officials and their demand that detailed commercial issues involving proposed Timor Sea developments should be resolved before the signing ceremony.

In their strongest indication yet, East Timor and senior UN officials said East Timor would probably seek international mediation over the seabed boundary between Australia and East Timor.

"Solving the commercial aspects of the Bayu Undan project or settling the unitisation of Greater Sunrise are not essential to completing the Timor Sea Treaty," one official said yesterday.

The official, who asked not to be identified, said the Timor Sea Arrangement, signed between Australia and the UN Transitional Authority for East Timor last July, specifically allowed for commercial aspects to be negotiated after a treaty was settled.

"The Timor Sea Arrangement was negotiated with UNTAET to provide project developers with some security in the absence of East Timor being an independent nation," the official said.

"As far as East Timor is concerned, the Timor Sea Arrangement is separate from the commercial arrangements affecting project developers. They should be able to negotiate those arrangements directly with an independent East Timor.

"It is wrong for Australia to argue these must be settled before a treaty with East Timor can be signed."

The official also said a Timor Sea treaty would not preclude East Timor from seeking to negotiate a maritime boundary with both Australia and Indonesia.

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The Australian May 02, 2002

Timor gas treaty troubled

By Nigel Wilson, Energy writer

FEARS are rising that negotiations over Timor Sea gas developments will not be finalised before East Timor's independence on May 20.

A delay would put in doubt the legal position of project developers because previous arrangements that were agreed between Australia and Indonesia are no longer recognised. Australian government and East Timorese officials are working to translate an agreement signed last year into a formal treaty.

The agreement with the United Nations-backed East Timor Transitional Administration expires with East Timor's nationhood.

Negotiations on a treaty have been complicated by a deal that Phillips Petroleum, developer of the Bayu-Undan gas recycling project now under construction, reached with the East Timorese late last year.

A spokesman for Foreign Minister Alexander Downer said yesterday the government was still confident a treaty would be ready to be signed by May 20.

But industry officials said yesterday the Phillips arrangement with East Timor raised fundamental questions about discriminatory tax regimes that would be difficult to resolve in the short term.

It is also understood Australia is refusing to set aside the so-called unitisation of the Greater Sunrise gas reservoir and is insisting it be included in the treaty.

Pressure is mounting in East Timor to revisit Sunrise because under present arrangements only 18 per cent of its potential multi-billion dollar tax revenues would go to the new country, with the remainder staying in Australia.

East Timor's leaders have been told they are likely to forgo revenues of more than $US30 billion ($55.8 billion) if the position that was agreed to last July prevails.

One industry source said yesterday the negotiating situation was that Australia was looking to turn last July's Timor Sea Arrangement into a complete package while East Timor wanted to "slice and dice" the arrangement.

Annex E of the arrangement has East Timor and Australia agreeing to unitise the Greater Sunrise gas reservoirs on the basis that only 20 per cent of them lie within the designated joint petroleum development area.

And it allows for a review of the production sharing formula. But Australia is insisting the original formula should be incorporated in the Treaty, while some East Timor officials argue it should be set aside for further negotiation.

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