Subject: AGE: East Timor bows to PM on gas

The Age March 6 2003

East Timor bows to PM on gas

By Mark Baker Asia Editor

East Timor has bowed to intense political pressure from Australia and will today rush through the signing of an agreement to clear the way for joint development of the vast oil and gas reserves of the Timor Sea.

Foreign Minister Alexander Downer will fly to Dili today to endorse a deal on the second-stage development, removing the last stumbling block after months of bitter wrangling between the two governments.

But senior Timorese officials claim the signing was agreed only after Prime Minister John Howard threatened to block long-delayed legislation before Federal Parliament implementing a treaty to enable first-stage development of the $20 billion Bayu-Undan liquefied natural gas project.

The officials told The Age Mr Howard warned that he would stall the treaty legislation, due in the Senate today after passing the lower house last night, unless the Timorese ratified a separate agreement on the longer-term development of the bigger Great Sunrise project, which straddles the treaty zone.

They said Mr Howard had delivered the blunt message in a telephone call yesterday morning to Timorese Prime Minister Mari Alkatiri, who had earlier refused calls from Mr Downer.

"It was an ultimatum. Howard said that unless we agreed to sign the new deal immediately, he would stop the Senate approving the treaty," a senior Timorese official said.

The official said that after a conversation late yesterday between Mr Downer and Timorese Foreign Minister Jose Ramos Horta, Dr Alkatiri agreed to call an extraordinary cabinet meeting this morning to endorse the Greater Sunrise deal.

Australian officials are understood to have been concerned that the Timorese might renege on the Greater Sunrise deal once the treaty legislation was passed.

Timorese officials said Dr Alkatiri had been deeply offended by Australian demands to fast-track cabinet approval of the Greater Sunrise agreement, reached late on Sunday after months of talks.

They said he had refused to take a telephone call from Mr Downer on Tuesday evening.

"He told his staff that he had two messages for Mr Downer: he is not welcome in Dili and he should learn to trust the Timorese," said one official. "They were treating him as if he was a child and he is offended.

"The Australians have shown great disrespect to the institutions of another sovereign nation. This sort of thing goes down like a lead balloon in Dili.

"The Timorese were pushed around for too long by the Indonesians. We don't want another big neighbour telling us what to do."

A spokesman for Mr Howard would not comment last night on the Timorese claims that he had threatened Dr Alkatiri. "The Prime Minister spoke to him (Dr Alkatiri) and the Foreign Minister spoke to their Foreign Minister. I can't tell you any more than that, " he said.

Any further delay in implementing the Timor Sea Treaty could have torpedoed the Bayu-Undan project, seen as vital for East Timor's future economic independence. An options agreement, under which two Japanese companies have agreed to buy the entire output, would expire next Tuesday were the treaty not in place.

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The Advertiser March 5, 2003

House OK's Timor treaty

By Sandra O'Malley and Denis Peters

LAWS ratifying the Timor Sea Treaty passed the lower house after their 11th hour introduction into parliament tonight, days before a deadline which threatened to scuttle a $1.5 billion gas deal.

Labor has pledged to support the legislation, key to the development of the Bayu Undan liquefied natural gas (LNG) development in the Timor Sea, but warned it could face a hazardous path through the Senate tomorrow.

International oil giant ConocoPhillips plans to build a pipeline from its Bayu Undan gas field in the Timor Sea to a Darwin facility to supply Japanese customers with LNG.

But ratification of the treaty by March 11 is a key condition of its three million tonnes per year LNG contract with two Japanese customers.

Resources Minister Ian Macfarlane said Australia stood to receive substantial revenue from development in the region covered by the treaty, known as the joint petroleum development area (JPDA).

Under the terms of the treaty, covering overlapping territorial claims in the Timor Sea, Australian and East Timor split upstream petroleum revenue from the JPDA 90-10 in favour of East Timor.

It also creates an administrative structure jointly operated by Australia and East Timor to govern the daily running and policy issues relating to the JPDA, as well as tax code covering its income.

Labor backbencher Warren Snowdon, who represents most of the Northern Territory, said the ratification of the treaty would bring a period of unprecedented economic growth to the Territory.

Opposition resources spokesman Joel Fitzgibbon said Labor would support the legislation but was deeply unhappy about the circumstances in which it had come into the parliament.

Delays in introducing the laws had put them at risk when they were already on a hazardous path through the Senate, with the minor parties capable of frustrating the passage of the legislation, he said.

Opposition foreign affairs spokesman Kevin Rudd said the management of the whole gas field matter over a long time had been regrettable.

"It is, in itself, a reflection of the foreign policy mismanagement by this government of so many aspects of its dealings with our regional partners, most recently East Timor," he said.

Independent MP Peter Andren voiced his objections to the legislation, claiming East Timor had been forced into accepting the treaty, which, on face-value, looked good for the newly independent nation.

"East Timor urgently needs her share of the income ... this income is currently being held in trust pending the ratification of (the treaty)," he said.

"Any attempt to challenge the seabed boundaries would stall access to those funds and East Timor could lose the principle foundation of its economic viability.

"They're over a barrel, so to speak."

But Mr Macfarlane said the treaty was mutually beneficial to both Australia and East Timor.


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