Friday January 21, 1:44 PM INTERVIEW: Australia Open To "Sensible" Timor Solutions

By Veronica Brooks Of DOW JONES NEWSWIRES

CANBERRA (Dow Jones)--Australia is hopeful East Timor will in the next week or two accept its invitation to return to the negotiating table to settle ownership of vast oil and gas reserves in the Timor Sea.

Doug Chester, Australia's chief negotiator in the protracted maritime border dispute, also told Dow Jones Newswires on Friday that Canberra is open to any "sensible" solution Dili might have in the wake of Woodside Petroleum Ltd.'s (WPL.AU) decision to shelve its US$5 billion Sunrise liquefied natural gas project.

"There is a window to restart negotiations in the next few months so we would hope to hear something very soon," Chester said, with officials planning to host the meeting in Australia.

"If Dili wants to look at a so-called creative solution that could see an interim arrangement, something that may have an immediate impact, we are happy to talk. We will listen to any sensible proposal."

"Or if they just want to go into the regular discussions on a permanent boundary, where we get all the scientists in the room, we're happy to do that," added Chester, who has just been named Australia's new ambassador to the Asia-Pacific Economic Cooperation forum.

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

Only this week Woodside 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.

At the time, East Timor accused Australia of issuing an ultimatum to accept a permanent maritime border on its terms while lowering its offer of compensation to an extra US$3 billion over 30 years, down from US$4.3 billion.

Chester rejected this claim, adding that Dili's team had rejected Australia's proposal and then took its own offer off the table.

"What we were discussing (in October) was an East Timorese proposal that we'd got very close to agreeing to. We asked them whether they still wanted to proceed on the basis of their proposal and they said no. They pulled their proposal off the table and they'd already rejected our proposal," said Chester.

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

Australia, instead, 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.

Chester restated Friday that securing agreement on a permanent boundary is a complex process that will take a number of years.

"Those negotiations will take time. It is inevitable. Historically they take many, many years," he said.

In a reorganization of the duties of Department of Foreign Affairs deputy secretaries, Chester succeeds Geoff Raby as Australian ambassador to APEC, while also taking responsibility for Canberra's proposed bilateral trade deal with Malaysia and a free trade pact between Australia, New Zealand and the Association of Southeast Asian Nations.

Negotiations on the latter trade treaty began kicked off with informal talks between officials in Singapore this week, with the full process due to begin in February.

Australia and Malaysia are conducting parallel feasibility studies into a possible free trade pact and these are nearing completion, Chester said.

"There is certainly a lot of interest in the business communities of both Australia and Malaysia," he said.

"It's hard to pre-empt the outcome of the scoping studies but one would think it made sense. It would be a high quality FTA, much along the lines of (those Australia has with) Singapore and Thailand," said Chester.

-By Veronica Brooks, Dow Jones Newswires; 61-2-6208-0901; veronica.brooks@dowjones.com -Edited by Ian Pemberton

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