East Timor-Australia Urged to Dialogue Over Gas Fields

By Matt Crook

DILI, May 6, 2010 (IPS) - The prickly issue of where to pipe and process gas from the Timor Sea between Australia and East Timor must be resolved through open dialogue, say members of civil society in East Timor.

"Don’t keep it deadlocked ­ it will not help. Whatever the options, we need to talk, as a neighbour, as a country," said Francisco Vaconceles, programme manager of Luta Hamutuk, a Timorese non-governmental organisation focused on issues of economic justice and public participation.

"The government can have its own standing and most of the East Timorese want to bring the pipeline to East Timor, but the government’s standing should be negotiated with the Australian government."

East Timor and Australia have agreed to split profits from a joint venture to exploit petroleum from Greater Sunrise ­ the collective name for the Sunrise and Troubadour gas fields located in the Timor Sea. Exploitation of the fields, which contain about 5 trillion cubic feet of natural gas, was hammered out in three treaties between the two governments from 2002 to 2006.

Before the money starts flowing in, they have to agree on where to process the gas into liquefied natural gas (LNG) to be exported, said Vaconceles.

There are three options: A pipeline could go to East Timor, one could go to Darwin, Australia, or a floating processing facility ­ the first of its kind ­ could be built somewhere in the middle.

Local civil society organisation La’o Hamutuk estimates that East Timor stands to make up to 19 billion U.S. dollars in upstream revenue wherever the plant is built, but bringing it to East Timor could add another 7 billion dollars of downstream revenue.

East Timor’s government insists that the gas should be piped to the fledgling nation, which achieved formal independence in 2002 and remains one of the world’s poorest countries.

The project is being operated by Australia’s Woodside Petroleum in partnership with ConocoPhillips, Royal Dutch Shell and Osaka Gas, collectively known as the Sunrise Joint Venture (JV). On Apr. 29, Woodside issued a statement saying that a floating liquefied natural gas (LNG) facility was the JV’s preferred option.

East Timor’s government quickly rejected Woodside’s announcement, claiming it reflected an "unacceptable level of arrogance".

"[East Timor] will not approve or agree to any arrangements which do not include a gas pipeline and LNG plant built onshore in [East Timor]. Woodside must acknowledge this, and not continue to mislead the public," said East Timor secretary of state for natural resources Alfredo Pires in a statement.

East Timor has also threatened to bring in Malaysia’s Petronas energy company to develop the Sunrise project, but Australia’s energy minister Martin Ferguson said East Timor must honour its legal commitments as stated in the treaties signed by the two governments, which include the need for plans to be approved by both sides and for the project to be developed to the "best commercial advantage consistent with good oilfield practice".

"The Australian government has consistently maintained that the location of LNG processing is a commercial decision for the Sunrise Joint Venture," Australian media quoted Ferguson as saying.

East Timor’s Sunrise Task Force, set up by the government in 2008, concluded that a pipeline to East Timor was viable, but the Task Force’s report has not been made public.

Vaconceles from Luta Hamutuk told IPS that Woodside and East Timor’s government must now back up their claims.

"If the government of East Timor has the best plan compared to Woodside, then we should present it to them and talk to the Australian government, because the Australian government and the East Timor government are the owners of the disputed area," he said.

"Woodside [executives] have done their job, but they just came up with one plan, and Woodside also just said this is the best plan. They are not saying that they have done studies of piping the gas to Australia or East Timor and that the best option is still the floating LNG plant," he added.

Woodside has continued to reiterate that piping the gas to East Timor is feasible but just does not make economic sense. One concern is that the deep-sea Timor Trough, which the pipeline would have to cross, makes the option unworkable.

But the pipeline would be a major economic boon for East Timor, and many in East Timor see it is a necessary one because the gas from Bayu Undan ­ the other large field in the Timor Sea, from which East Timor derives almost all of its wealth ­ is piped to Australia, which has led to claims East Timor got the short end of the deal.

"It’s more than about national pride. The company talks about profit, whereas the government talks about the prosperity of the people," he added. "If you bring the pipeline to East Timor, then a lot of economic activities will develop. If you leave it floating in the sea, the profit is more to the company," Vaconceles said.

East Timor’s government hopes the onshore LNG plant will fuel development in the tiny nation of 1.1 million people, but not everyone is convinced the country is ready to reap the benefits.

Local NGO L’ao Hamutuk noted on its website that "[Not] enough has been done yet in education, law-making, planning and infrastructure sectors for [East Timor] to maximize its benefits from Sunrise LNG."

Getting Woodside and the governments of East Timor and Australia on the same page is now key for the project to find its feet.

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