INTERVIEW-East Timor confident will win legal battle

Reuters, 03.04.04, 3:24 AM ET

By Michelle Nichols

CANBERRA, March 4 (Reuters) - East Timor said on Thursday it was confident a lawsuit brought against it by U.S. petroleum group Oceanic Exploration Company over Timor Sea oil and gas rights would be quickly dismissed.

Foreign Minister Jose Ramos-Horta said there was no basis for the lawsuit filed in the United States on Monday by Oceanic and subsidiary Petrotimor, seeking $10.5 billion in damages from East Timor, Indonesia, Australia and U.S. oil giant ConocoPhillips (nyse: COP - news - people).

"I am confident it will be thrown out," Ramos-Horta told Reuters in an interview.

"We are not terribly worried about it. We will continue our very fruitful cooperation with Australia and ConocoPhillips, so the work will continue smoothly without interruption."

ConocoPhillips operates the massive Bayu-Undan gas field in the Timor Sea, which began producing its first natural gas liquids from the development last month and will start to produce liquefied natural gas (LNG) for Japanese buyers in 2006.

Other shareholders include Italian energy giant Eni <ENI.MI>, Australian Santos <STO.AX>, Japanese energy firm INPEX and Japanese utility Tokyo Electric Power Co <9501.T> and Tokyo Gas Co. <9531.T>.

ConocoPhillips has declined comment on the legal action.

Impoverished East Timor, which gained independence in 2002 after years of often brutal Indonesian rule, has pinned its nation-building plans on the multi-billion dollar revenues it expects to earn from oil and gas developments in the Timor Sea.

The government, which currently receives $150 million a year in aid, has promised to use oil and gas royalties to alleviate poverty, create jobs and improve education for the nation's population of 760,000.

Ramos-Horta said the first revenues from the Bayu-Undan development of around A$100 million ($75 million) would be paid to the East Timor treasury in 2007. "But that will increase greatly over the following years," he said.

Oceanic and Petrotimor say they were given the exclusive rights for exploration and development of seabed resources in the area by former colonial power, Portugal, in 1974.

But their position was lost after Indonesia invaded East Timor in 1975 and subsequently annexed it.

Indonesia and Australia then agreed a treaty covering petroleum development in the zone. A new revenue-sharing agreement for the zone was agreed with Australia after East Timor gained independence in 2002.

Oceanic and Petrotimor failed early last year in a similar claim for damages against the Australian government, the joint authority which administered the area between Australia and East Timor and ConocoPhillips.

The Federal Court of Australia dismissed the claim in February last year, saying it had no jurisdiction over the case.

($1=A$1.33)

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