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The La'o Hamutuk Bulletin
Vol. 3, No. 8: December 2002 (2/3)

English PDF Format  |    Bahasa Indonesian PDF Format (to come)

Issue focus: Australia

Table of contents:

Part 1

Part 2

Part 3

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Chronology of Oil and Gas Developments in the Timor Sea

 Portuguese period 1500s-1975


1893: First non-Timorese explorations of on-shore oil resources in Portuguese Timor, in Laclubar, Manatuto, with small-scale exports.


1956: Australian-based Timor Oil Ltd. begins off-shore explorations, to be joined by other companies over the next twelve years.


1956: Portugal claims sovereignty over the seabed in accordance with median line principles which were later ratified in the 1958 Geneva Convention. Australia rejects the claim, with competing assertions of its territory.


1970-1972: Several Australian oil companies conduct explorations near and off the south coast of Portuguese Timor


1970: Australia and Indonesia begin negotiations on seabed boundaries, ignoring Portuguese objections that the seabed should split midway between Timor and Australia. Australia and Indonesia signed treaties "Establishing Certain Seabed Boundaries" on 18 May 1971 and 9 October 1972, which came into effect in November 1973. These treaties were based on the continental shelf principle, which was biased in favor of Australia. Because Portugal did not participate, the other two countries could not complete the line between Portuguese Timor and Australia, creating the "Timor Gap."


1974: Portugal grants exclusive exploration permits in the Timor Sea to Oceanic Exploration/PetroTimor, a U.S. company. The permit area covered 60,700 square kilometers extending from a point near the south coast of Portuguese Timor to the median line with Australia. Australia objects.


1974: Sunrise Gas field is discovered, although political and other issues delay its development until recent years.


17 Aug 1975: Australian ambassador to Indonesia Richard Woolcott cables his government: "…closing the present gap in the agreed sea border … could be much more readily negotiated with Indonesia… than with Portugal or independent Portuguese Timor."


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Indonesian Occupation 1975-1999


7 Dec 1975: Indonesia invades East Timor. PetroTimor and all Portuguese institutions flee.


17 July 1976: Indonesia claims to annex East Timor as its 27th province, but the United Nations continues to regard the territory as a colony of Portugal until 1999.


Oct 1976: Indonesia's Justice Minister, Prof. Mochtar Kosumaatmadja confirms that Indonesia is prepared to negotiate a seabed boundary to close the Timor Gap on the same terms as the 1971-2 Indonesia-Australia treaties (continental shelf boundaries favorable to Australia).


20 Jan 1978: Australia "recognises de facto" that East Timor is part of Indonesia.


Feb 1979: Australia and Indonesia begin to negotiate a seabed boundary south of East Timor, signifying Australia's de jure recognition of Indonesia's annexation of East Timor. More than a dozen negotiating rounds are conducted over the next decade.


Oct 1983: The Jabiru 1a well in the Timor Sea (between West Timor and Australia), drilled by the Australian company BHP, finds significant oil deposits. Exploration and test wells continue, with extraction beginning in 1986. By 1989 confirmed oil reserves in the Timor Sea are 214 million barrels, with Jabiru producing 42,000 barrels every day.


11 Dec 1989: Australia and Indonesian Foreign Ministers Gareth Evans and Ali Alatas sign the Timor Gap Treaty in a ceremony in an airplane flying over the Timor Sea. The treaty establishes a Zone of Cooperation (ZOC) between East Timor and Australia, north of the median line. It provides for Indonesia-Australia joint exploration of the illegally occupied territory, with revenues shared 50-50. Portugal protests immediately.


Oct 1990: East Timor resistance spokesman José Ramos-Horta writes: "Australian oil companies would be well advised not to jump into the Timor Gap area. …A good advice to Australian business: wait and see how things develop in next 5 to 10 years."


Feb 1991: East Timorese resistance leader Xanana Gusmão writes the Australian parliament: "Australia has been an accomplice in the genocide perpetrated by the occupation forces, because the interests which Australia wanted to secure with the annexation of East Timor to Indonesia are so evident. The best proof is the Timor Gap Agreement."


9 Feb 1991: Timor Gap Treaty enters into force following ratification.


Feb 1991: Portuguese government initiates lawsuit against Australia in the International Court of Justice (ICJ) in the Netherlands. Portugal contends that the Timor Gap Treaty violates East Timor's right to self-determination and Portugal's rights as the administrative power. Since Indonesia does not accept the jurisdiction of the court, Australia is the only defendant.


12 Nov 1991: Indonesian troops massacre more than 250 peaceful East Timorese demonstrators at the Santa Cruz cemetery in Dili.


11 Dec 1991: Australia and Indonesia award production sharing contracts to Phillips Petroleum, Royal Dutch Shell, Woodside Australian Energy and other petroleum companies to explore and exploit resources in the Timor Gap Zone of Cooperation. PetroTimor declines to bid, stating the treaty violates its valid claim. Contracts continue to be awarded, and explorations continue, throughout the 1990s.


1994: First exploitable oil in the ZOC discovered at Elang-Kakatua.


June 1994: The International Court of Justice rules on Portugal v. Australia. By a 14-2 vote, the court upholds East Timor's right to self-determination, but cannot invalidate the Timor Gap Treaty because Indonesia, whose claim to East Timor is being challenged, does not accept the court's jurisdiction. Two judges dissented, one writing that "Australia's action in entering into the Timor Gap Treaty may well be incompatible with the rights of the people of East Timor."


Oct 1994: Woodside strikes oil in Laminaria, alongside the ZOC in an area which would be East Timor's if the 1971-2 boundaries between Indonesia and Australia had been drawn fairly with Portuguese/East Timorese participation.


1995: Phillips Petroleum and other companies discover the Bayu-Undan oil and gas field, within the ZOC.


14 Mar 1997: Australia and Indonesia sign a treaty covering the water column boundary, but not the seabed resources, under the principles established by the United Nations Convention on the Law of the Sea in 1982.


22 July 1998: CNRT leaders Mari Alkatiri, José Ramos Horta and João Carrascalão issue a statement: "The CNRT supports the rights of the existing Timor Gap contractors and those of the Australian government to jointly develop East Timorese offshore oil reserves in cooperation with the people of East Timor."


July 1998: Production starts in the small Elang-Kakatua oil field, within the ZOC. By 2002, the field is mostly exhausted, having produced approximately 31 million barrels of oil for Phillips Petroleum and its partners. Although Indonesia and Australia have received revenues from this field, East Timor's share, about $2 million/year since 2000, has been placed in escrow, pending ratification of the May 2002 Timor Sea Treaty.


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27 Jan: Indonesian president BJ Habibie accepts East Timorese demands for an internationally-supervised referendum on independence. Eight months of TNI/militia terror and devastation ensue.


30 Aug: East Timor's people vote overwhelmingly to reject integration with Indonesia. Following massive destruction by departing Indonesian troops, the territory comes under a United Nations transitional administration leading to independence in May 2002.


Oct: Seven oil companies led by Phillips Petroleum approve development of the Bayu-Undan gas and oil field, in the ZOC. Since then, the companies have invested more than US$1.5 billion in the project. The first phase, liquid production, will start in 2004, with a second phase of gas production starting in 2006. Total East Timor government revenues from Bayu-Undan could be more than US$3 billion, 20 times as much as Elang-Kakatua.


Nov: Woodside's Laminaria-Corallina project (which includes BHP and Shell) begins producing oil. The companies extract more than 100 million barrels, about half the total reserve, during the next two years, generating more than US$900 million for the Australian government. Some or all this revenue should be East Timor's if its Exclusive Economic Zone (EEZ) were drawn under UN Law of the Sea (UNCLOS) principles.


29 Nov: Mari Alkatiri, East Timorese spokesman on the Timor Gap, says "we still consider the Timor Gap Treaty an illegal treaty. This is a point of principle. We are not going to be successor to an illegal treaty."


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10 Feb: Australia and UNTAET sign an interim Exchange of Notes and Memorandum of Understanding, which continue the 1989 Australia-Indonesia Timor Gap Treaty terms but replace Indonesia with East Timor. These agreements specify a 50-50 division between Australia and East Timor of oil and gas production from the Zone of Cooperation defined in the Timor Gap Treaty, now called the Joint Petroleum Development Area (JPDA). Nothing is said about areas outside of the JPDA, which should be within East Timor's EEZ.


Oct: UNTAET begins negotiations with Australia for longer-duration agreement over division of Timor Sea resources, but not about maritime boundaries or the EEZ.


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Feb: Ramiro Paz, UNTAET senior economics advisor in the East Timor Transitional Administration (ETTA), writes a six-page paper "The Timor Gap Treaty vs. an Exclusive Economic Zone: Economic Independence for East Timor" for ETTA Economics Minister Mari Alkatiri. Paz strongly recommends that East Timor pursue its full EEZ entitlements under international law, rather than accept or revise the terms of the now-defunct Timor Gap Treaty.


9 April: UNTAET Minister for Political Affairs Peter Galbraith speaks to the Australian Petroleum Production and Exploration Association. Fresh from the second round of negotiations with Australia, Galbraith calls for scrapping the Timor Gap Treaty and negotiating boundaries with Australia based on international law. He urges that an agreement be reached before 15 July to avoid possible complications from East Timor's soon-to-be-elected government.


5 July: Galbraith, Alkatiri, and two Australian Ministers sign a Memorandum of Understanding (MOU) called the Timor Sea Arrangement. Under this Arrangement, which replaces the February 2000 MOU, East Timor will receive 90% and Australia 10% of oil and gas revenues from the JPDA. The JPDA inherits the ZOC from the 1989 Timor Gap Treaty, altering only the division of revenues. The largest gas field, Greater Sunrise, is deemed to lie 20% in the JPDA and 80% in Australian territory. Although the Arrangement is "without prejudice" to a future seabed boundary delimitation, it does not question Australia's claim to fields outside the JPDA.


Aug: PetroTimor files suit in Australian Federal Court based on its 1974 agreement with Portugal. The company wants billions of dollars in compensation for lost revenues from Timor Sea oil and gas.


30 Aug: East Timor elects a Constituent Assembly to write its constitution, which later becomes the first Parliament. Fretilin wins 57% of the vote.


21 Dec: Phillips Petroleum and UNTAET agree on a tax and fiscal package to define how East Timor's new government will benefit from the revenues and investment in the Bayu-Undan oil and gas field in the JPDA. The "Bayu-Undan Understandings" follow many months of negotiation, in which Phillips attempted to use the U.S. and Australian governments to pressure East Timor's leaders. Discussions of these issues continued in August and October 2002.


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15 Mar: Phillips announces that two Tokyo companies will purchase the bulk of Bayu-Undan gas for 17 years, starting in 2005.


21 Mar: Australia formally withdraws from international processes for resolving maritime boundary disputes under the Law of the Sea and the International Court of Justice.


23 Mar: PetroTimor conducts seminars on Timor Gap in Dili. Their experts argue that East Timor should rightfully own 100% of Sunrise and Bayu-Undan, as well as all of Laminaria/Corallina (which lies completely outside of the JPDA). Australian barrister Christopher Ward says "The 5 July 2001 Agreement between Australia and UNTAET represents a political strategy so that East Timor will not raise questions again about the past agreements."


April: Peter Galbraith explains UNTAET's process of negotiation on Timor Sea to the East Timor's Constituent Assembly. He emphasized that East Timor has a "very good legal claim" to more than is agreed to in July 2001 Arrangement, and that the Timor Sea Treaty ends when the maritime boundary is settled, after which East Timor would get 100% in their agreed seabed. Galbraith claims that the agreement laid out in the July 2000 MOU is "the best deal for East Timor that could be negotiated with Australia."


17 May: Development drilling of 16 wells begins at Bayu-Undan.


19 May: East Timorese civil society groups and opposition political parties protest the imminent signing of the Timor Sea Treaty between East Timor Prime Minister Mari Alkatiri and Australian Prime Minter John Howard.


19-20 May (midnight): The Democratic Republic of East Timor becomes an independent nation.


20 May: East Timorese and Australia Prime Ministers sign the Timor Sea Treaty and an Exchange of Notes to replace the 5 July 2001 Arrangement between UNTAET and Australia. The substance of that Arrangement is continued. Both Prime Ministers commit to work for expeditious ratification of the treaty.


12 June: East Timorese civil society groups form the Timor Gap Working Group, a coalition to monitor the legal process of Timor Sea developments. They urge the East Timor Parliament not to ratify the Timor Sea Treaty.


17 June: At the South East Asia Australia Offshore Oil Conference in Darwin, East Timor Prime Minister Mari Alkatiri pledges that the Timor Sea Treaty "will be ratified soon" because it is about "commitment and understanding" between two countries.


19 July: The first round of negotiations between East Timor and Australia on a Sunrise international unitization agreement (IUA) concludes with both parties pledging to reach agreement by the end of 2002. The IUA will define how the Greater Sunrise field, with about 9 trillion cubic feet of natural gas (worth about US$16 billion), will be divided. Australia (currently expected to receive 82% of Sunrise revenues) has placed a high priority on reaching this agreement so that the Sunrise project can proceed.


17 Aug: The Northern Territory Trades and Labour Council holds a seminar on Timor Sea development in Darwin. Three East Timorese non government organizations attend: the East Timor Union Confederation (KSTL), Labor Advocacy Institute for East Timor (LAIFET), and Independent Center for Timor Sea Information (CIITT).


24 Aug: East Timor's National Parliament enacts a maritime boundary law based on UNCLOS principles, claiming an Exclusive Economic Zone for 200 miles off East Timor's coasts. The law sets the basis for maritime boundary negotiations with both Indonesia and Australia, which have not yet been scheduled.


9 Sep: East Timor Prime Minister Mari Alkatiri and other ministers visit the Bayu-Undan project, hosted by Phillips Petroleum.


17 Sep: East Timor's Council of Ministers approves the 20 May Timor Sea Treaty, sending it to East Timor's parliament to be ratified.


3 Oct: Three representatives from East Timorese civil society (NGO Forum, CIITT and La'o Hamutuk) testify at the Australian Parliamentary Joint Standing Committee on Treaties on the Timor Sea Treaty in Darwin. These three organizations appealed to parliament not to ratify the Timor Sea Treaty signed on 20 May 2002, as did many of the more than 80 submissions received by the Committee.


Oct: Sunrise unitization agreement talks continue. Australia and Woodside want to link this agreement to the ratification of the Timor Sea Treaty, thereby holding the Bayu-Undan project (which primarily benefits East Timor) hostage to East Timor's concession of the bulk of revenues from the larger Sunrise project to Australia. The East Timorese government and Phillips urge that the two agreements be treated separately.


11 Nov: The Australian Parliament Joint Standing Committee on Treaties recommends prompt ratification of the Timor Sea Treaty and prompt agreement on Sunrise unitization.


25 Nov: East Timor's Parliament begins debate on the Timor Sea Treaty.


27 Nov: Australian Foreign Minister Alexander Downer, after meeting with Mari Alkatiri in Dili, says that Australia may not ratify the Timor Sea Treaty until February 2003 or later. The oil companies say that the delay could endanger arrangements to sell gas from Bayu-Undan and Sunrise, adding to pressure on East Timor's government to promptly accept Sunrise unitization terms which unfairly benefit Australia, rather than insisting that the maritime boundaries be negotiated.


6 Dec: Sunrise partners Woodside, ConocoPhillips, Shell and Osaka Gas announce the indefinite delay of the Sunrise project, claiming that neither the floating LNG processing plant nor the pipeline to Darwin is economically viable. 

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La’o Hamutuk, The East Timor Institute for Reconstruction Monitoring and Analysis
P.O. Box 340, Dili, East Timor
Mobile: +61(408)811373; Land phone: +670(390)325-013
Email: laohamutuk@easttimor.minihub.org 
Web: http://www.etan.org/lh

International contact: +1-510-643-4507, lh@etan.org