Small U.S. Oil Firm Files Suit Over Oil Rights in East Timor

The Wall Street Journal

Tuesday, March 2, 2004

By SUSAN WARREN

Staff Reporter of THE WALL STREET JOURNAL

A small U.S. oil company that once held a license to produce oil from the Timor sea filed a federal lawsuit Monday accusing U.S. oil giant ConocoPhillips and the governments of Australia, Indonesia and East Timor of conspiring to illegally seize control of the lucrative oil fields.

In the suit filed in a U.S. district court in Washington D.C., Oceanic Exploration Co. of Englewood, Colo., leveled the charges on behalf of its Portuguese unit Petrotimor Companhia de Petroleos SARL. Oceanic is seeking at least $10.5 billion in actual damages, which would be tripled under federal law if the charges are affirmed.

The suit adds another wrinkle to the turbulent, strife-torn history of the tiny East Asian island of East Timor, which has been the object of several international tug-of-wars because of oil in its coastal waters.

Oceanic accuses the defendants of violating U.S. antitrust and racketeering laws in a series of events over the last 30 years. In particular, ConocoPhillips is accused of paying millions in bribes to the Indonesian and East Timor governments to obtain information on the fields and secure better terms for developing the Timor Sea fields.

A ConocoPhillips spokesman said he hasn't seen the lawsuit and couldn't comment.

The allegations arise from an exploration and production license awarded to Oceanic's Petrotimor unit by the Portuguese government in 1974, when East Timor was a Portuguese colony.

Indonesia and Australia divided rights to the fields after Indonesia invaded the tiny island nation in 1975. International oil companies, including ConocoPhillips, struck deals with Indonesia and Australia for rights to develop the fields, though Indonesia's sovereignty over the island was never internationally recognized, according to the lawsuit.

East Timor finally won independence in May 2002. But the strife left it impoverished, with oil revenues offering the best hope for reconstruction.

Under United Nations guidance, East Timor renegotiated oil agreements with ConocoPhillips and its partners. It is still negotiating with Australia over how to divide ownership of the fields in the coastal waters between the nations. In the past, Australia has claimed the lion's share, but East Timor believes the riches should be divided more equally.

Last year, Oceanic filed a lawsuit in Australia's federal courts attempting to reassert its rights to the license for developing the fields. But the Australian court said it didn't have jurisdiction to rule on a Portuguese-issued license, and dismissed the case. Oceanic decided to pursue the conspiracy and antitrust charges in the U.S.

Petrotimor complains that East Timor has refused to recognize its rights to develop the fields. The lawsuit accuses ConocoPhillips of bribing the Indonesian government to secure exploration data stolen from Petrotimor offices after the invasion of East Timor. Later, the lawsuit alleges, ConocoPhillips paid more than $2.5 million in bribes to East Timor officials to secure its cooperation.

ConocoPhillips is the lead operator, with about 57% ownership, of East Timor's Bayu-Undun field, the first field to be developed in the Timor Sea. It also has a 30% interest in the Greater Sunrise field, operated by a subsidiary of Royal Dutch/Shell Group, which is in an earlier stage of development.

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