Subject: DJ: Timor Sea Talks Focused On Creative Solution

Also We will die without the oil: Gusmao

Wednesday April 20, 2005, 6:41 pm
UPDATE: Timor Sea Talks Focused On Creative Solution

By Veronica Brooks


CANBERRA (Dow Jones)--Australia's Foreign Minister Alexander Downer said Wednesday maritime boundary negotiations with East Timor will resume next week, marking the sixth meeting in a year as the two sides move closer to a deal.

Downer said the April 26-28 meeting in Dili will concentrate on East Timor's proposal outlined last month for a "creative solution" that would allow oil and gas projects in the Timor Sea to go ahead, pending a permanent boundary being settled.

In particular, agreement on the proposal would enable the US$5 billion Sunrise liquefied natural gas project to begin, while in the longer term providing significant infrastructure and industry development for East Timor.

But Downer said he is cautious about whether a resolution is near.

"We've been very optimistic about these talks in times gone by and then the next round of talks haven't been so successful," he told reporters.

"So I think we'll be more cautious in our expressions of how we think the talks will go at this stage. We can just be hopeful that they will gradually lead to a resolution of the differences between Australia and East Timor," Downer said.

The last round of top-level diplomatic negotiations was held in Canberra in early March.

"Under East Timor's proposal, both countries would continue to work together to exploit the Timor Sea petroleum resources, giving East Timor 90% of the royalties from the Joint Petroleum Development Area," Downer said.

"Significant revenues are already flowing to East Timor, and based on recent oil prices East Timor will receive about US$14.5 billion in revenues over the next 20 years - an average of almost US$2 million per day," the minister said.

Impoverished East Timor's economic well-being rests on Dili's bid for a major redistribution of royalties from the vast oil and gas deposits that lie beneath the sea that divides the two countries.

Negotiations broke down acrimoniously in October last year, prompting oil and gas producer Woodside Petroleum Ltd. (WPL.AU) to shelve its Sunrise project.

The breakdown meant Woodside couldn't meet its end-2004 deadline for legal and commercial certainty that would allow it to capture a 2010 marketing "window" for LNG exports.

Woodside has said it won't spend 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%.

Australia and East Timor have agreed to an interim revenue-sharing deal covering a part of the Timor Sea that takes in the ConocoPhillips-operated Bayu Undan field.

This Joint Petroleum Development Area splits the government revenues 90%-10% in East Timor's favor.

But East Timor has so far refused to ratify a second revenue-sharing deal known as the International Unitization Agreement. Under this deal, 80% of Woodside's Sunrise gas field would fall within Australian waters and the remaining 20% in the JPDA.

If Dili's "creative solution" gets the green light, negotiations between Australia and its northern neighbor on a permanent boundary would be postponed for decades until the Sunrise resource was exhausted.

And if the parties resort back to thrashing out a permanent maritime border, this process would take many years.

In terms of a permanent boundary, Dili wants a border in the middle of the 600 kilometers of ocean separating the two nations.

However, Canberra 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 would put the bulk of natural resources in the Timor Sea under Australia's control.

-By Veronica Brooks, Dow Jones Newswires;


-Edited by Graham Morgan


We will die without the oil: Gusmao

By Tom Allard, Foreign Affairs Reporter April 20, 2004

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East Timor risks becoming a failed state, its President, Xanana Gusmao, has said in a blunt warning to Australia to ease its hardline position over the carve-up of $30 billion in oil and gas reserves.

Australia and East Timor are locked in antagonistic negotiations over the Timor Gap oil and gas fields. Australia has rejected East Timor's claim for the maritime boundary to be halfway between the countries.

The existing boundaries favour Australia and are the result of negotiations with Indonesia, the former ruler of East Timor. Several lucrative oil deposits are in Australian areas despite being nearer to East Timor.

"It makes the difference to our future," Mr Gusmao told The Guardian. "We would not like to be a failed state. Without all this we will be another Haiti, another Liberia, another Solomon Islands, and we do not want that."

Mr Gusmao said East Timor remained desperately poor, with much of its infrastructure ravaged by the conflict in 1999 and little but natural resources on which to base its economy.

"How can we prevent poverty if we don't have money?" he said. "How can we reduce disease, how can we stabilise the country, how can we strengthen the democratic process, how can we strengthen tolerance . . . if we don't have money?" advertisement

The strongest rhetoric yet from East Timor comes as its relations with Australia deteriorate. Australia has already received $1.7 billion from deposits in disputed areas, including the Greater Sunrise, Laminara, Buffalo and Corallina oil fields, which lie substantially or completely outside the joint petroleum development area.

East Timor receives 90 per cent of the revenues from the area and the rest goes to Australia. Australia gets all the revenue from nearby oil assets outside the area.

If the boundary was changed to halfway between the countries - the standard for international maritime law - many lucrative oil fields would go to East Timor.

Then East Timor would earn $US12 billion ($16 billion) in royalties over 30 years instead of $US4.4 billion from a continuation of the interim arrangements, its Government said.

The Greens' leader, Bob Brown, said Australia's deal with East Timor was theft. Australia's Parliament has approved, with Labor support, making the interim boundaries permanent. But it has not passed in East Timor.

"The agreement robs the poorest country in South-East Asia to line the pockets of the Government and the oil corporations of the richest country in the region, Australia," Senator Brown said.

More than half of East Timor's population lives on about $400 a year. Its annual budget is about $100 million, mostly foreign aid.

The fear of failed states on Australia's doorstep has prompted the Federal Government to revamp regional foreign policy.

The Foreign Minister, Alexander Downer, said the complaints were "part of the negotiating process". He expected talks to stretch well beyond talks in Dili this week.


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