Subject: Australia promised secret aid to seal Timor gas deal

Received from Joyo Indonesian News

also: The Australian: Dili's Timor Sea gas deal sweetener

Agence France Presse March 12, 2003

Australia promised secret aid to seal Timor gas deal

Australia promised East Timor millions of dollars in a secret aid deal that convinced the world's newest nation to give up claims to a huge undersea gas field, a newspaper reported.

Under unpublicized terms of the deal reached last week on sharing billions of dollars in revenues from gas resources under the Timor Sea, Australia agreed to pay East Timor one million US dollars per year for at least five years beginning immediately, The Australian reported.

Australia also agreed to pay its tiny neighbor an additional 10 million US dollars a year once production from the Greater Sunrise gas field begins around the end of the decade, it said.

The aid promise sealed a controversial agreement under which East Timor agreed to Australia's terms for sharing revenues from the Greater Sunrise field, which is believed to hold more than 30 billion dollars worth of gas.

The special payments were contained in a document signed last Thursday after Foreign Minister Alexander Downer was forced to travel to Dili to secure East Timor's signature on the agreement for Greater Sunrise, The Australian reported.

East Timor and Australia had been locked in intense negotiations for months over sharing revenues from gas resources in a joint development area in the Timor Sea and from fields that straddled the joint development area and Australian territory.

The two government's agreed last year on a Timor Sea Treaty giving East Timor 90 percent of the revenues from the joint development area, where one field, Bayu Undan, is ready for development.

But Australia held up ratification of the treaty until East Timor agreed to its terms for sharing revenues from the much larger Greater Sunrise field, which mostly lies outside the joint development area.

The dispute came to a head last week due to a March 11 deadline for development of the Bayu Undan field.

With the threat that developers would pull out of Bayu Undan and deprive cash-strapped East Timor of an estimated three billion dollars in revenues, Australia was able obtain its demand for more than an 80 percent share of revenues from Greater Sunrise.

East Timor had demanded a 50-50 share of Greater Sunrise revenues.

The Australian March 12, 2003

Dili's Timor Sea gas deal sweetener

By Nigel Wilson, Energy writer

EAST Timor will receive $US1 million ($1.6 million) a year for at least five years for agreeing to Australia's request to sign a revenue-sharing document on Timor Sea gas reserves by last week's deadline.

In addition, the new nation will receive $US10 million a year from the Australian Government, over and above its share of revenues, once production from the Greater Sunrise reservoir begins.

The special payments are contained in a document signed last Thursday after Foreign Minister Alexander Downer was forced to travel to Dili to secure East Timor's signature on the so-called unitisation agreement for Greater Sunrise.

Mr Downer's rush visit was arranged after John Howard was forced to contact his East Timor counterpart, Mari Alkitiri, to explain the disastrous consequences to both countries of delaying signatures by even as much as one day.

The Sunrise and Troubadour reservoirs ­ containing about 8.2 trillioon cubic feet of gas about 450km from Darwin and 150km from Dili ­ straddle tthe boundary of a joint petroleum development area agreed between the two countries last May. Under the terms of the treaty, East Timor is entitled to 90 per cent of government revenues from projects that lie in the development area.

But East Timor has been seeking an equitable share of the revenues from Greater Sunrise, arguing it was unfairly treated because revenues from any development are likely to be far greater than from Bayu Undan, the only project so far committed to within the development area.

Under the treaty, East Timor was entitled to impose taxes and charges on only 20.1 per cent of revenues from any project developed on the Sunrise reservoirs.

While no project has been approved for Greater Sunrise, its owners, Woodside, ConocoPhillips, Shell and Osaka Gas are seeking markets in Asia and North America that would allow them to invest $5 billion on a world's first floating liquefied natural gas (LNG) facility to exploit the reserves.

This could be operating by the end of the decade, ultimately bringing billions of dollars of revenues to the Australian and East Timor governments.

It was also learned yesterday the unitisation agreement for Greater Sunrise and the associated memorandum of understanding will have to be resubmitted to federal parliament.

Although East Timor endorsed the unitisation agreement early last week, Dr Alkitiri initially indicated that it would not be signed in Dili before a deadline expired covering a $20 billion contract involving the Bayu Undan project in the Timor Sea.

The Bayu Undan contract signed in December 2001 to supply LNG to two Japanese energy utilities was dependent on both countries ratifying the Timor Sea Treaty by March 10.

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