Subject: DJ Interview: Timor Positive Ahead Of Fresh Boundary Talks

Also: AFR: E Timor Moves to Open Up Oil and Gas Fields

Interview: Timor Positive Ahead Of Fresh Boundary Talks

By Veronica Brooks

CANBERRA, Feb. 8 (Dow Jones)--East Timor will enter another round of maritime boundary talks with Australia in a positive manner but the fledging nation will continue to press Canberra to agree to more regular negotiations.

As for any confidence Australia and its impoverished neighbor can thrash out a permanent boundary to settle ownership of vast oil and gas reserves in the Timor Sea, East Timor's secretary of state for tourism, environment and investment, Jose Fernandez Teixeira, is more guarded.

"I always approach negotiations on an optimistic and positive note. We'll see. We can't pre-empt anything," he said of the meeting scheduled for March 15-17 in Canberra.

"We would certainly like them to be held much more frequently than twice a year...because we think these issues are critical between our two countries and we should resolve them," he told Dow Jones Newswires in an interview.

But Teixeira said Dili isn't confident that Woodside Petroleum Ltd.'s (WPL.AU) stalled US$5 billion Sunrise liquefied natural gas project can be revived by any breakthrough on the protracted border dispute.

"I think the company has made it pretty clear. They're not investing any more in it (Sunrise)," said Teixeira.

"Those actions don't give you much room to see there is any optimism. They've made a decision to move on with investment elsewhere," he added.

Woodside has put the brakes on its Sunrise development, having last year warned Canberra and Dili that it needed fiscal certainty on the project by the end of 2004 to capture a 2010 marketing "window" for LNG exports.

Woodside recently restated it won't be spending any more money to advance Sunrise and has reassigned staff to other projects.

Woodside owns 33.4% of Sunrise, regarded as the richest prize in the Timor Sea. Its partners are ConocoPhillips (COP) with 30%, Royal Dutch/Shell Group (RD) with 26.6% and Japan's Osaka Gas Co. (9532.TO) with 10%.

The 2004 deadline passed after Canberra and Dili, during talks in October, failed to agree on a formula for splitting the billions of dollars worth of oil and gas revenues.

East Timor is fighting for a maritime border in the middle of the 600 kilometers of sea separating the two countries.

However, Australia argues the boundary should be the edge of the continental shelf, which in some places is just 80 kilometers from East Timor's coastline. That border puts the bulk of natural resources in the Timor Sea under Australia's control.

East Timorese Foreign Minister Jose Ramos-Horta, the 1996 Nobel peace laureate, said at the weekend that a boundary deal was within reach.

Late Monday, his Australian counterpart Alexander Downer said he too is optimistic an agreement can be struck.

"From my contacts with the East Timorese over the last couple of weeks, I'm cautiously positive about how those talks will go forward," Downer told reporters.

Teixeira said he is hopeful future boundary negotiations are based on genuine respect for each nation's rights under international law.

"We can only hope discussions take place within that framework and wait and see what comes out of it," he said.

"These are two sovereign nations and we have good cooperation in other areas. The question becomes whether we build on those relationships," he said.

Australia took action in 2002 aimed at strengthening its position in boundary talks with one of the world's poorest nations by withdrawing from the maritime jurisdiction of the International Court of Justice, thereby blocking any East Timorese appeal should the two sides prove unable to agree a boundary.

Doug Chester, Australia's chief negotiator in the border row, said last week Canberra is happy to focus on formal legal negotiations to settle a permanent maritime boundary but is also open to "creative solutions" that would allow development of oil and gas projects pending a permanent boundary.

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Australian Financial Review February 7, 2005

East Timor Moves to Open Up Oil and Gas Fields

Rowan Callick Asia-Pacific editor

East Timor is pressing on with plans to become a major new gas and oil producer, despite the stalling last month of the $5 billion Greater Sunrise project amidst mutual recriminations with Canberra.

Its parliament is on the verge of approving a new legal regime, following which the government will invite tenders for exploration. A seismic survey of the part of the Timor Sea that is clearly within the country's boundaries is already under way. And the government is establishing a state-owned oil company.

Jose Teixeira, East Timor's secretary of state for the environment and investment - effectively the resources minister - told The Australian Financial Review that East Timor had substantial indicators of oil and gas on land and under sea, beyond the areas currently contested with Australia.

"We have begun the process of creating a transparent, competitive and very modern licensing regime based on production-sharing contracts, with a competitive fiscal regime."

The process of drafting the legislation took about 18 months, he said. "We had an international consultation process, seeking opinions from the petroleum industry, and feedback from across the country, and now it is before parliament. I don't see any issues with its being passed within a month."

The fiscal regime had been benchmarked, he said, against those of Australia, Indonesia and Malaysia, to ensure its competitiveness.

The offshore seismic survey covering 20,000 square kilometres is being conducted by China's BGP, owned by PetroChina, and Norwegian company Global Geo Services.

"It's a non-exclusive, multi-client survey, and we shall use the data for an international bidding round from April to June, to be followed by the award of the first exploration licences, both on and offshore."

Mr Teixeira said the national oil corporation would operate commercially, in both upstream and downstream activities.

East Timor is also establishing a Petroleum Fund to manage the potential gas and oil revenues. MrTeixeira said the fund established by Norway was one of the models.

He said: "We are calling it Norway Plus. It will involve checks and balances, with clear and separate publication of all payments."

The fund will be administered by parliament, he said. It will feature a consultative council, including appointees from civil society.

Mr Teixeira said that the Greater Sunrise field, which operator Woodside Petroleum said last month it had put on hold, was an important project, in which investment was already quite advanced. "It presents a great opportunity to grow partnership with our neighbour Australia, but it's not our only option" for becoming an oil and gas producer.

Since talks broke down over Greater Sunrise, Canberra broke the stand-off, in mid-January, to invite Dili to resume discussions, but no date has yet been fixed.


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