INTERVIEW: Labor Vows Calmer Waters In Timor Sea Talks

By VERONICA BROOKS

Of Dow Jones Newswires

CANBERRA -- Outlining a clear break with Australia's conservative government, the center-left Labor Party plans a much more conciliatory approach to a protracted border dispute with East Timor.

If Labor wins office at an election later this year, it wants to settle a permanent sea boundary in three to five years and increase the intensity of negotiations as Dili seeks a massive redistribution of royalties from the Timor Sea oil and gas fields.

Labor energy and mining spokesman Joel Fitzgibbon is also optimistic the negotiations, in full accordance with international law, won't require independent arbitration.

"We are confident we could deal with this matter on a bilateral basis and that would be our goal," he told Dow Jones Newswires in an interview Friday.

"They (East Timor) have talked previously about a monthly (negotiation) exercise. I don't know whether it needs to be that regular but we would come to some agreement," he added.

But Fitzgibbon declined to say if Labor will accept Dili's claim that the maritime boundary be drawn to give the fledgling and impoverished nation full control of some significant oil and gas fields.

"We're in no position to say what should be the starting point of the negotiations. It's difficult to do that from opposition," he said, although he noted a Labor government won't issue any further exploration licenses in disputed zones until a boundary is finalized.

"And given we are talking about the settlement of a permanent boundary in three to five years, that would indicate we take a far more sympathetic approach to East Timor's concerns than does the government."

He argued Labor's approach will give greater certainty to the multinational energy companies seeking to exploit the billions of dollars worth of resources below the Timor Sea.

"There is enormous uncertainty. We really are in no man's land," said Fitzgibbon.

"And while the government argues it's about giving certainty to business and getting on with the job, the effect is just the opposite."

In what has become a protracted David and Goliath battle, East Timor and Australia continue to lock horns over the ultimate ownership of vast seabed oil and natural gas deposits located in the Timor Sea.

Shell Voices Marketing Concerns

The matter will likely be a hot topic of discussion at a regional energy conference in Darwin next week, to be attended by East Timor's Prime Minister Mari Alkatiri.

Just two months before East Timor became independent from Indonesia in May 2002, Australia announced it would no longer accept the jurisdiction of the International Court of Justice on maritime borders.

That left the East Timorese without an independent forum to deal with their claim that the border should be drawn in the middle of the 600 kilometers of sea separating the two countries.

Dili's claim would place 90% of Timor Sea oil and gas reserves on East Timor's side.

The change would also locate the vast Sunrise undersea gas fields and a nearby Bayu Undan gas field wholly in East Timor's waters.

But Australia is adamant its continental shelf should be the border as was agreed with Indonesia. In some places that is just 150 kilometers from East Timor's coastline and more than 450 kilometers from Darwin.

Under the current negotiation timetable, Australia has refused to meet with East Timorese negotiators more than twice a year.

But according to one of the Sunrise partners, Royal Dutch/Shell (RD), the long-running border dispute is hurting marketing efforts.

Shell also noted this week that while it is confident Australia and East Timor will reach agreement, the company would be "very reticent" about significantly increasing investment on Sunrise until a deal is ratified.

A report issued last month by international aid group Oxfam said Australia's refusal to cede more royalties from the seabed resources to East Timor risked turning the new nation into a failed state.

For now, Australia and East Timor have agreed to an interim treaty to carve up a portion of the Timor Sea.

This treaty gives East Timor 90% of government revenues from the so-called Joint Petroleum Development Area, including Bayu Undan.

ConocoPhillips (COP) leads the Bayu Undan joint venture as the operator, partnering Italian firm Eni Spa. (ENI.MI), Australian producer Santos Ltd. (STO.AU) and Japan's Inpex, Tokyo Electric Power (9501.TO) and Tokyo Gas (9531.TO).

However, East Timor has so far refused to ratify a second revenue-sharing agreement known as the International Unitization Agreement. Under this deal, 80% of Sunrise - the largest prize in the Timor Sea - falls within Australian waters and the remaining 20% in the Joint Petroleum Development Area.

Shell has a 26.6% stake in the Sunrise project. Other partners in the 7.7 trillion cubic feet field are ConocoPhillips with 30%, Australia's Woodside Petroleum Ltd. (WPL.AU) with 33.4% and Japan's Osaka Gas Co. (9532.TO) with a 10% stake.

-By Veronica Brooks, Dow Jones Newswires; 61-2-6208-0901; veronica.brooks@dowjones.com -Edited by Ian Pemberton

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