Also: AUSTRALIAN POLITICAL DEBATE OVER TIMOR SEA OIL DRAGS ON

The Australian

July 30, 2004 Friday All-round Country Edition Australia warns Timor on gas claim

Nigel Wilson

THE Howard Government has told East Timor it will get no revenue from the Bayu Undan and Greater Sunrise gas fields if it pursues its claim for a maritime boundary set at the median point between the two countries.

Australian officials have warned that even if the East Timor claim were accepted and the boundary changed from the edge of the continental shelf 80km from the East Timor coast, the new border would probably be established north of the two gas fields.

This would mean the billions of dollars in revenue from the fields would flow exclusively to Australia rather than be shared with East Timor.

The warning ratchets up the row between Australia and East Timor that has led to a domestic political argument between the Howard Government and Labor.

The Government claims Opposition Leader Mark Latham is threatening the national interest by suggesting negotiations on the boundary should begin afresh because of "bad blood" in earlier talks between the two countries.

The new government strategy emerged yesterday as Don Voelte, chief executive officer of Woodside Petroleum, which heads the Greater Sunrise development joint venture, met East Timor Prime Minister Mari Alkatiri in Dili.

Mr Voelte is understood to have told Dr Alkatiri the $5billion project would not proceed unless East Timor ratified an agreement signed last year covering the legal and fiscal terms for development.

Dr Alkatiri has said previously he will not seek parliamentary ratification of the agreement unless Australia agrees to negotiate the boundary within five years.

East Timor, which is being advised by the former US ambassador to Croatia, Peter Galbraith, has embarked on an international campaign seeking support for its claim that the maritime boundary should be at the mid-point between the two countries.

East Timor claims Australia's action will rob it of up to $US30billion in petroleum resources in the Timor Sea.

Dili has accused Canberra of being unfair to one of the world's poorest countries through Foreign Minister Alexander Downer's insistence that the boundary should reflect Australia's continental shelf, which in places is as close as 80km to East Timor.

The second round of negotiations on the boundary is scheduled for September.

Australian sources said last night the latest legal advice on the boundary confirmed the East Timorese case was weak.

A boundary redrawn to the midpoint might not deliver the benefits hoped for by the East Timorese because, for technical and geophysical reasons, the known gas reserves in the Timor Sea were clearly associated with the Australian landmass and not East Timor.

This means that even if the continental shelf was not accepted as the boundary, a mid-point would not result in the gas reserves at Bayu-Undan and Greater Sunrise being under East Timor's control. Under present arrangements East Timor receives 90 per cent of revenues from Bayu-Undan and would receive about 18 per cent of Greater Sunrise revenues because only 20.1 per cent of those reservoirs lie in a jointly administered area.

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Asia Pulse

July 30, 2004 Friday 4:46 PM Eastern Time

AUSTRALIAN POLITICAL DEBATE OVER TIMOR SEA OIL DRAGS ON

DARWIN, July 30

Federal and state mining ministers have shot down a proposal to include East Timor in their talks on the exploitation of oil and gas resources.

Victoria's Energy Minister Theo Theophanous today urged his counterparts to allow East Timor, and Papua New Guinea, to sit on the Ministerial Council on Minerals and Petroleum Resources as an observer.

He also urged the council to press the federal government to treat East Timor fairly in any talks over revenue from the A$5 billion (US$3.4 billion) Sunrise gas project in the Timor Sea.

But federal Resources Minister Ian Macfarlane said the motion was voted down by federal and state ministers at the meeting in Alice Springs today.

Mr Macfarlane labelled the motion a smokescreen for what he called Labor's foreign policy "blunder" over Australia's negotiations with East Timor.

"It was obviously a desperate attempt to divert attention from the policy blunder of the federal Labor leader," Mr Macfarlane said.

Sunrise partner Woodside Petroleum (ASX:WPL) this week warned the massive project would topple if Australia and East Timor did not resolve their differences over the division of billions of dollars of royalties from the project by the year's end.

The federal government has threatened to suspend the talks on a maritime boundary after Opposition Leader Mark Latham said a Labor government, if elected, would make a fresh start on the negotiations.

"The issue is not whether or not East Timor comes on the ministerial council," he said.

"Mr Latham has very seriously compromised the Australian position in terms of our negotiations."

Australia and East Timor are currently in talks on a permanent seabed boundary to divide control of the estimated A$30 billion in royalties from Timor Sea oil and gas deposits, including the Greater Sunrise field.

East Timor has so far refused to ratify another revenue-sharing deal struck earlier known as the International Unitisation Agreement which says 80 per cent of the lucrative Sunrise field falls within Australian waters.

Mr Macfarlane said the federal government was willing to let East Timor sit as an observer at the ministerial meetings - if it ratified the unitisation agreement.

"The commonwealth is prepared to have the East Timorese admitted as observers provided they keep their word and ratify the international unitisation agreement," he said.

"There's no point in them coming to this table as an observer until they have fulfilled the undertaking they gave us."

Mr Theophanous said it was the government, not Labor, that was placing the Sunrise project in jeopardy.

"The only people that are jeopardising this project is the Howard government because it's highly unlikely that the East Timorese will agree to the proposals that they have put before them because it is not in their national interest," he told ABC radio.

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