INTERVIEW: World Bank Wants Speedy Timor Sea Resolution

By Veronica Brooks Of DOW JONES NEWSWIRES

CANBERRA, June 9 (Dow Jones)--The World Bank's representative in East Timor, Elisabeth Huybens, is keeping a watchful eye on the protracted maritime border dispute playing out between Canberra and Dili.

Well aware that East Timor's economic well-being rests on Dili's bid for a major redistribution of royalties from the Timor Sea oil and gas fields, Huybens wants a quick and fair resolution to the boundary negotiations.

But also mindful that the World Bank is only an observer, Huybens is diplomatic when questioned whether the Washington-based multilateral institution favors a particular timetable under which a permanent boundary should be finalized.

Dili wants it settled in three to five years, but Canberra refuses to be locked in.

"By our mandate, we can't recommend anything to anybody on this issue," Huybens, who has been the World Bank's country manager in East Timor for almost two years, told Dow Jones Newswires in a telephone interview.

"We would hope at least discussions evolve swiftly and fairly. We don't have a particular timeframe."

Huybens does point out, however, the World Bank doesn't want the oil and gas deposits located in the disputed areas "prejudiced" while the negotiations continue.

Asked if that means Australia should desist from issuing new exploration permits in the area of overlapping claims, she said: "Either that or the resources should be held in such a way that when the ultimate boundaries are drawn, it is possible to partition the resources according to the permanent boundaries."

"Oil and gas revenues will be Timor-Leste's principal resource of government revenue. Of course the level of those revenues will determine what kind of government Timor-Leste can establish," she said.

Under current boundary arrangements, East Timor will be able to finance a government budget of approximately US$100 million a year perpetually "because the government of Timor-Leste is determined to save much of its oil and revenues such that future generations can benefit as much as current generations," said Huybens.

That compares with an existing annual government budget of about US$75 million and would be enough to fund "a very lean government and very spare public services."

Earlier this week, East Timor Prime Minister Mari Alkatiri said his country will look at a "creative solution" to help speed development of the Woodside Petroleum Ltd. (WPL.AU)-operated Sunrise gas field in the Timor Sea.

But Alkatiri said Dili isn't prepared to back down on its border dispute with Australia over ownership of petroleum reserves that could be worth US$12 billion to the island nation. The World Bank agrees with this estimate, which is well north of the US$4 billion in likely revenues flowing from the temporary arrangements.

World Bank Cites East Timor Pipeline Benefits

Northern Territory Chief Minister Clare Martin also weighed into the political debate this week at a regional energy conference, urging Canberra to negotiate a more generous, one-off revenue deal with East Timor over Sunrise.

Her comments came after one of the Sunrise partners, Royal Dutch/Shell Group (RD), cautioned that the long-running border row is hurting marketing efforts and the company will be "very reticent" about significantly increasing investment on Sunrise until a deal is ratified.

While Australia and East Timor have agreed to a treaty to carve up an area of the Timor Sea, the deal is only an interim arrangement pending a fixed boundary.

The Joint Petroleum Development Area deal gives East Timor 90% of government revenue from the ConocoPhillips (COP)-operated Bayu Undan field which is due to begin exports of liquefied natural gas in early 2006.

However, East Timor has so far refused to ratify a second revenue-sharing deal 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 JPDA.

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 will place the vast Sunrise gas fields and the 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.

Australia also has refused to meet with East Timorese negotiators more than twice a year.

Huybens wouldn't be drawn on the Northern Territory's pitch for Canberra and Dili to negotiate a one-time Sunrise revenue deal with Timor.

"That would have to be something for the government of Timor to take a view on," she said.

Woodside needs to decide on a development plan to provide certainty to potential buyers of the gas, which includes Osaka Gas (9532.TO) along with other Asian energy utilities.

Woodside is finalizing studies on design options which include a pipeline to East Timor, a pipeline to Darwin and a floating LNG plant.

Huybens noted Dili will benefit significantly if Woodside chooses the East Timor pipeline option.

"If that is something that is feasible then Timor should look at it carefully from the point of view...it could bring downstream benefits to Timor Leste and employment opportunities in a country that has very little resources right now and has a very high unemployment rate."

Partners in the 7.7 trillion cubic feet Sunrise field are ConocoPhillips with 30%, Woodside with 33.4%, Shell with 26.6%, and Osaka Gas with a 10% stake.e-SYX10767

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

-By Veronica Brooks, Dow Jones Newswires

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