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Townsville Bulletin

More gas cash for E Timor By Nigel Wilson and Patrick Walters 12aug04

AUSTRALIA is to offer up to 50 per cent of the Greater Sunrise gas reserves to East Timor in a $3 billion bid to defuse a difficult maritime boundary dispute.

The complex deal, which is yet to be approved by federal cabinet, could result in East Timor getting more than $5 billion if the Greater Sunrise project goes ahead.

Foreign Minister Alexander Downer said yesterday he hoped to wind up negotiations by Christmas on the outstanding Timor Sea issues.

"It will be an agreement that I am sure will be very beneficial to the Government and people of East Timor," he said after meeting his East Timorese counterpart, Jose Ramos Horta. "I feel we have made extremely good progress today and we are absolutely heading in the right direction."

Woodside Petroleum, which heads the international consortium planning to convert Greater Sunrise reserves into liquefied natural gas for export, repeated last night that it was seeking clarity on the legal and fiscal terms covering the development.

An official said the joint venture, which included ConocoPhillips, Shell and Osaka Gas, needed this to be determined by the end of the year if the project were to proceed.

Mr Ramos Horta said he shared Mr Downer's optimism that a comprehensive agreement could be achieved by the end of the year.

"We have the basic ideas ... I think we can meet halfway, and now we just need to work out the details," he said.

Mr Downer declined to spell out the detail of yesterday's negotiation but clearly signalled a more generous approach by Canberra to the existing shares in the Greater Sunrise field.

The breakthrough followed comments by Mark Latham that he would restart negotiations over the Timor Sea if he won the coming poll.

East Timor has refused to ratify an agreement it signed with Australia last year that would give it only 18 per cent of Greater Sunrise revenues - estimated to be between $10 billion and $12 billion over the 25-year life of a $5 billion development.

For months, East Timor Prime Minister Mari Alkatiri has linked ratification with a demand that Australia set a firm timetable for maritime boundary talks.

Woodside chief executive Don Voelte travelled to Dili last month and warned that the project would be stalled unless there was a decision within months.

It is understood Mr Downer's agreement with Mr Ramos Horta means the boundary will not change from the edge of the continental shelf, which in places is less than 80km from the southern coastline of East Timor.

"Our concerns are less with the revenue that we can extract from the Timor Sea than with the broader questions of sovereignty," Mr Ramos Horta said.

Before the meeting, sources in Dili had flagged that East Timor wanted a 50-50 split on Greater Sunrise, but this is expected to be resisted by Australia.

The eventual outcome will most likely include a payment from Australia to East Timor that would cover the difference in company tax paid by the Sunrise partners on the increased share of the project that would now be in East Timorese hands.

Analysts said last night that this payment could amount to hundreds of millions of dollars over the life of the project.

Mr Ramos Horta said he had discussed the issue with both President Xanana Gusmao and Dr Alkatiri before leaving Dili.

"Both leaders have asked me to convey to Alexander Downer our firm commitment to find a solution that is satisfactory to the two sides."

In the longer term, East Timor is also looking for a broader agreement with Australia on security arrangements for Timor Sea resources including fisheries, with Australia undertaking the bulk of the surveillance effort.

Federal cabinet is yet to approve any revision of Canberra's previous negotiating position on Greater Sunrise.

Mr Downer hopes that the talks will determine the maritime boundary between Australia and East Timor, confirming Canberra's legal position based on the continental shelf.

East Timor has engaged in an international campaign to force Australia to negotiate a boundary at the mid-point between the two countries.