Received from Joyo Indonesian News

also: Australia to sign oil, gas treaty with E. Timor on Mon.; and $2 billion compo claim over Timor Sea exploration rights and New Study Boosts E. Timor's Rights To Vast Offshore Oil And Gas Reserves

International Herald Tribune May 17, 2002

Battle lines drawn in fight for oil riches off East Timor

Michael Richardson International Herald Tribune

DILI, East Timor Energy companies and governments are maneuvering for control of disputed offshore oil and natural gas reserves, estimated to be worth more than $40 billion, after East Timor gains independence at midnight Sunday.

Although colonization by Portugal for more than 400 years, and then military occupation by Indonesia for 24 years until 1999, left East Timor as one of the poorest and least-developed territories in the world, it stands to gain petroleum income worth at least $3.2 billion over 17 years, starting in 2004.

The money is expected to come from the Bayu-Undan gas and liquids field in the Timor Sea, between East Timor and northern Australia. The field is being developed by an international group headed by Phillips Petroleum Co. of the United States.

But there is an even larger prize at stake: the Greater Sunrise gas field. Phillips has a 30 percent stake in that field. Royal Dutch/Shell Group has a 26.56 percent stake, Woodside Petroleum Ltd. of Australia has 33.44 percent and Osaka Gas Ltd. of Japan has 10 percent.

Legal experts say that if East Timor's maritime boundary with Australia is fixed in line with recent changes in international law, it could bring all or the majority of the Greater Sunrise field under East Timor's jurisdiction.

This would give Dili up to $36 billion more in government revenue than the $8 billion it can now expect over the life of the project from 2009 to 2050.

In the intensifying scramble over Timor Sea oil and gas, Petrotimor Ltd., a Portuguese-registered unit of Oceanic Exploration Co. of the United States, says it will seek a ruling in the Federal Court of Australia this month to give it ownership of the Bayu-Undan reserves being developed by the Phillips-led group.

Lawyers for Petrotimor in Sydney said that the company had a strong case. But United Nations legal experts advising the East Timor government said the claim was unlikely to succeed. "Petrotimor is engaged in exploration by litigation," one adviser said.

Meanwhile, Australia and the new government of East Timor are preparing to start negotiations - which experts say are likely to be protracted and difficult - to finalize their maritime boundary.

Evidently fearing that it might lose petroleum reserves to East Timor, Australia announced March 25 that it would henceforth exclude maritime boundaries from compulsory dispute settlements in the International Court of Justice and the International Tribunal for the Law of the Sea.

"Australia's strong view is that any maritime boundary dispute is best settled by negotiation rather than litigation," Attorney General Daryl Williams and Foreign Minister Alexander Downer said in a joint statement.

Mari Alkatiri, East Timor's chief minister, described the move as "an unfriendly act."

Following last-minute negotiations, Downer said he expected to sign a treaty in Dili on Monday, the first day of East Timor's independence.

Known as the Timor Sea Treaty, it will regulate petroleum operations in a 62,000 square-kilometer (23,900 square-mile) joint development zone.

The treaty was agreed to in draft form in July, but with several tax and pricing issues outstanding. It grants Dili 90 percent of revenue from oil and gas fields in the zone.

They include the Elang Kakatua North oil fields that have produced more than 24 million barrels of oil since 1998. These fields will close in the next few years just as the much larger Phillips-led venture starts producing liquids and then natural gas from its Bayu-Undan field, which is being developed at a cost of about $3 billion.

The field contains estimated reserves of 400 million barrels of condensate and liquefied petroleum gas and 96.3 billion cubic meters (3.4 trillion cubic feet) of gas. Phillips and its partners - including Inpex of Japan, Agip of France and Santos of Australia - signed an agreement in March to export virtually all of the gas to Japan.

Petrotimor claims to have received a concession from Portugal in 1974, the year before Indonesia invaded East Timor, that covers the Timor Sea zone and some adjacent areas.

But UN legal experts said that neither Portugal, the UN Transitional Administration in East Timor that has been preparing the territory for independence, nor the East Timor government recognize this concession.

The joint development zone was the result of a deal between the Australian and Indonesian governments in 1989 that allowed petroleum exploration and development to go ahead, with production to be split equally between each country. < < Back to Start of Article DILI, East Timor Energy companies and governments are maneuvering for control of disputed offshore oil and natural gas reserves, estimated to be worth more than $40 billion, after East Timor gains independence at midnight Sunday.

Although colonization by Portugal for more than 400 years, and then military occupation by Indonesia for 24 years until 1999, left East Timor as one of the poorest and least-developed territories in the world, it stands to gain petroleum income worth at least $3.2 billion over 17 years, starting in 2004.

The money is expected to come from the Bayu-Undan gas and liquids field in the Timor Sea, between East Timor and northern Australia. The field is being developed by an international group headed by Phillips Petroleum Co. of the United States.

But there is an even larger prize at stake: the Greater Sunrise gas field. Phillips has a 30 percent stake in that field. Royal Dutch/Shell Group has a 26.56 percent stake, Woodside Petroleum Ltd. of Australia has 33.44 percent and Osaka Gas Ltd. of Japan has 10 percent.

Legal experts say that if East Timor's maritime boundary with Australia is fixed in line with recent changes in international law, it could bring all or the majority of the Greater Sunrise field under East Timor's jurisdiction.

This would give Dili up to $36 billion more in government revenue than the $8 billion it can now expect over the life of the project from 2009 to 2050.

In the intensifying scramble over Timor Sea oil and gas, Petrotimor Ltd., a Portuguese-registered unit of Oceanic Exploration Co. of the United States, says it will seek a ruling in the Federal Court of Australia this month to give it ownership of the Bayu-Undan reserves being developed by the Phillips-led group.

Lawyers for Petrotimor in Sydney said that the company had a strong case. But United Nations legal experts advising the East Timor government said the claim was unlikely to succeed. "Petrotimor is engaged in exploration by litigation," one adviser said.

Meanwhile, Australia and the new government of East Timor are preparing to start negotiations - which experts say are likely to be protracted and difficult - to finalize their maritime boundary.

Evidently fearing that it might lose petroleum reserves to East Timor, Australia announced March 25 that it would henceforth exclude maritime boundaries from compulsory dispute settlements in the International Court of Justice and the International Tribunal for the Law of the Sea.

"Australia's strong view is that any maritime boundary dispute is best settled by negotiation rather than litigation," Attorney General Daryl Williams and Foreign Minister Alexander Downer said in a joint statement.

Mari Alkatiri, East Timor's chief minister, described the move as "an unfriendly act."

Following last-minute negotiations, Downer said he expected to sign a treaty in Dili on Monday, the first day of East Timor's independence.

Known as the Timor Sea Treaty, it will regulate petroleum operations in a 62,000 square-kilometer (23,900 square-mile) joint development zone.

The treaty was agreed to in draft form in July, but with several tax and pricing issues outstanding. It grants Dili 90 percent of revenue from oil and gas fields in the zone.

They include the Elang Kakatua North oil fields that have produced more than 24 million barrels of oil since 1998. These fields will close in the next few years just as the much larger Phillips-led venture starts producing liquids and then natural gas from its Bayu-Undan field, which is being developed at a cost of about $3 billion.

The field contains estimated reserves of 400 million barrels of condensate and liquefied petroleum gas and 96.3 billion cubic meters (3.4 trillion cubic feet) of gas. Phillips and its partners - including Inpex of Japan, Agip of France and Santos of Australia - signed an agreement in March to export virtually all of the gas to Japan.

Petrotimor claims to have received a concession from Portugal in 1974, the year before Indonesia invaded East Timor, that covers the Timor Sea zone and some adjacent areas.

But UN legal experts said that neither Portugal, the UN Transitional Administration in East Timor that has been preparing the territory for independence, nor the East Timor government recognize this concession.

The joint development zone was the result of a deal between the Australian and Indonesian governments in 1989 that allowed petroleum exploration and development to go ahead, with production to be split equally between each country.

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