Subject: DJ: Australia/Indonesia Oil Deal Seen
Intact On Timor Vote
Date: Sat, 26 Jun 1999 08:50:06 +0000
From: "John M. Miller" <fbp@igc.apc.org>Received from Joyo Indonesian
News:
Dow Jones June 21, 1999
Australia/Indonesia Oil Deal Seen Intact On Timor Vote
DARWIN, Australia -- The outcome of East Timor's autonomy vote in August likely will
have little impact on the Timor Gap Treaty between Australia and Indonesia, an Australian
official said Monday.
The treaty covers the sharing of royalties between the two nations in an area between
them in the energy-rich, but mostly undeveloped Timor Sea covered by the Zone of
Cooperation Agreement.
Robert Mollah, Australian executive director of the Australia-Indonesia joint authority
for the zone, said there is considerable speculation about the involvement of East Timor
in future activities relating to the zone.
This will depend on the results of the scheduled vote on the autonomy of the Indonesian
province, he said.
"Autonomy will probably mean relatively little change in the operation of the
treaty with any redirection of income solely a matter for the Indonesian side," he
said.
Mollah was speaking at the South East Asia Australia Offshore Conference organized by
IIR Conferences.
Independence Seen Increasing Uncertainty
However, he said any successful push for independence by East Timor will make the
situation more unpredictable.
"Hopefully, all sides will recognize the success of the treaty to date and would
wish to see the cooperation continued," he said.
The zone is divided into three areas and creates rules allowing for the exploration and
development of petroleum resources.
Area B is at the southern end of the zone and is administered by Australia, with
Indonesia entitled to part of the tax collected from oil production. Area C, at the
northern end of the zone, is administered by Indonesia and Australia is entitled to a
share of taxes collected from oil production in that zone.
Area A is jointly administered with a sharing of taxes collected.
An agreement over taxes from natural gas production from the zone hasn't yet been
finalized.
Mollah told the conference a feature of the past year has been widespread recognition
that the zone and the Timor Sea is a major gas/condensate province.
The major company operating in the zone is Phillips Petroleum Co. (P) of the U.S.,
through its as yet undeveloped Bayu-Undan gas/condensate project and other activities.
Other stakeholders in the zone include Royal Dutch/Shell Group (RD) and Australia's
Woodside Petroleum Ltd. (A.WPL).
These and other companies, 27 in all, have spent A$485 million on exploration and A$196
million on development in the zone, Mollah said.
Oil production from area A began in 1998 from the Elang/Kakatua field. Ten million
barrels of volatile light crude were extracted, resulting in about A$2.5 million being
distributed to each of the contracting states, he said. This field will be exhausted
within a few years.
Significant Tax Collections Seen Likely
Further developments are proposed, with most attention focused on Bayu-Undan, he said.
Mollah believes significant funds should accrue to Indonesia and Australia following
recoupment of contractor's investments in any future development.
"The amounts and timing will be dependent on further development investments, the
production rates and the oil and gas pricing," he said.
Meanwhile, Barry Jones, executive director of the Australian Petroleum Production and
Exploration Association, a national lobby group, said the Australian industry will work
constructively with whatever eventuates from the East Timor autonomy vote or push for
independence from Indonesia.
Jones called for protection of existing rights in the zone and transparent investment
rules for awarding new rights.
The taxation system must be efficient and effective he said, and a clear and
transparent dispute resolution procedures must be in place, he told the conference Monday.
If the East Timorese ultimately choose independence, Australia must provide substantial
help to set these up, he said.
In April 1999, the Australian Attorney-General's Department, told a parliamentary
committee that if East Timor becomes independent it might want to pursue amendments to the
Timor Gap Treaty beyond the changes needed to ensure it kept operating effectively.
East Timor and Australia would be the main negotiators in such an event, it said, but
continuing Indonesian agreement would be "useful to obtain" over the location of
the zone's east and west boundaries, it said.
-By Ray Brindal; 612-6208-0902; rbrindal@ap.org
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