Agence France Presse

May 8, 2002 Wednesday

Timor Sea treaty negotiations enter 'end-game' before May 20

BRONWYN CURRAN

JAKARTA, May 8

East Timor and Australia held crucial talks in Darwin Wednesday to finalise a treaty on sharing revenue from lucrative Timor Sea oil and gas reserves, on which the impoverished territory's economic future hinges.

The treaty is due to be signed by Australian Prime Minister John Howard and East Timor's Chief Minister Mari Alkatiri on May 20, the day East Timor becomes the world's newest nation and one of its poorest.

In recent weeks officials on both sides of the resource-rich waters have hinted the signing may be delayed by technical disputes.

But East Timor negotiators were adamant going into the talks that there were no grounds for holding up the signing and said they hoped Australia would not raise fresh obstacles.

"We're in the end-game right now," one of the negotiators told AFP by telephone on Tuesday.

"We will hopefully have a treaty to be signed on May 20 and it will be effective as of then."

A United Nations official with the East Timor delegation confirmed from Darwin, Australia, that talks were held Wednesday but gave no details.

A draft treaty known as the Timor Sea Arrangement was signed by both countries and the United Nations, as East Timor's interim administrator, on July 5 last year.

It grants Dili 90 percent of revenues from joint development projects, effectively guaranteeing the territory of 738,000 people at least 3.2 billion dollars spread over 17 years in gas revenues alone.

Projected revenues from the estimated 500 million barrels of oil also lying beneath the Timor Sea bring the potential windfall for Dili to almost five billion dollars, forming the cornerstone of the future budget.

East Timor, poverty-stricken even before Indonesian-backed militias destroyed most of its infrastructure in 1999, is relying almost totally on Timor Sea tax revenues for its first glimmer of self-sufficiency -- in three to four years.

By the fiscal year 2005-06, taxes from the Timor Sea revenues are projected to reach 92 million dollars, of a total revenue projection of 114 million dollars. Other gas and oil revenue will be invested for long-term needs.

"This is one of the most important treaties that East Timor will ever enter into. We would hope there would be no dispute to prevent this from going ahead," the negotiator said, ruling out the validity of last-minute demands to clarify future commercial issues before the scheduled signing.

Australia has hinted it wants to first iron out commercial considerations arising from both the Bayu Undan field and Greater Sunrise field. Some 20 percent of Sunrise falls under the joint project area and 80 percent under the Australian area.

Under a 'unitisation' system, East Timor is supposed to get a flow of the profits from the Australian sector of Sunrise as well. Dili officials say the details of such an arrangement can wait until after the treaty is signed.

"The treaty is a framework within which you can have developments. From our perspective it was not a requirement, under the arrangement signed in July, that development issues be resolved first," said the negotiator, who declined to be identified.

Last month Australian Foreign Minister Alexander Downer said the treaty could be delayed due to differences over maritime boundaries.

But the treaty is not contingent on maritime boundaries, Dili officials said. Boundaries cannot be negotiated until East Timor has full sovereignty and the treaty is there to guarantee the revenue shareout in the meantime.

"The treaty is without prejudice to maritime boundaries. It is an interim agreement on maritime boundaries. It creates an area where you will jointly explore," the negotiator said.

"The main point is that on July 5 we had a treaty ready to go and it's still ready to go."

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