Received from Joyo Indonesia News

also: Australia, East Timor Are Near An Accord On Oil, Gas Royalties

The Straits Times [Singapore] Saturday, March 11, 2005

Analysis:

Australia: Timor Leste's best friend or big bully?

By Michael Richardson For The Straits Times

THE latest round of negotiations between Australia and Timor Leste - formerly known as East Timor - on how to share energy reserves in the Timor Sea ended this week with an agreement to hold more talks soon.

If some of the heated rhetoric that has been flying around is a guide, Australia has descended in recent months from the rank of Best Friend to Big Bully in its dealings with Timor Leste. But is this a fair description?

The immediate issue is whether to negotiate a permanent maritime boundary in the 600km of the Timor Sea that separates the two countries and, if so, where to put the line.

The seabed in this area contains valuable oil and gas fields that are being exploited or explored by Australian and foreign companies, and may well contain even greater petroleum riches that have not yet been discovered or proven.

So the position of the boundary will determine how much of the royalties, or taxes, from development of these fields goes to Australia and how much to Timor Leste.

A lot of money is at stake. The energy reserves in the area are worth an estimated US$32 billion (S$52 billion).

Linked to this issue: What kind of relationship should Australia, one of the world's richest societies, have with Timor Leste, one of the world's poorest nations?

Australia played a major role in the United Nations operation in 1999 that helped protect and revive Timor Leste after its vote for independence from Indonesia triggered mayhem by pro-Indonesian militias supported by nationalist elements in the Indonesian armed forces. Since then, Australia has been generous with aid and other assistance to its close northern neighbour.

However, Timor Leste's leaders argue that the key to their plans to shift the economy from heavy dependence on foreign aid to self-reliance and rising living standards is an assured stream of future oil and gas revenue from the Timor Sea. If Timor Leste has a viable economy, it will be better placed to join Asean.

Timor Leste's leaders want a maritime boundary to be fixed halfway between their country's southern coastline and Australia's Northern Territory.

Some of Timor Leste's officials have accused Canberra of bad faith and stealing resources that rightfully belong to Timor Leste.

The country's former guerilla leader turned president, Mr Xanana Gusmao, put it this way: 'How can we prevent poverty if we don't have the money?' he asked last year. 'How can we reduce disease, how can we stabilise the country, how can we strengthen the democratic process, how can we strengthen tolerance?'

Australian Foreign Minister Alexander Downer retorted that Timor Leste was making 'a very big mistake thinking that the best way to handle this negotiation is trying to shame Australia... accusing us of bullying, when you consider all we've done for Timor Leste.'

There is an interim arrangement between Australia and Timor Leste known as the Joint Petroleum Development Area covering a large zone in the Timor Sea. Timor Leste gets 90 per cent of royalties from energy reserves exploited in this zone. This amounts to long-term revenue of about US$8 billion. Australia gets 10 per cent of the royalties.

But the joint zone is positioned much closer to Timor Leste than to Australia because of an earlier deal Canberra worked out with Indonesia, which invaded Timor Leste in 1975 and occupied it for the next 24 years.

The deal was based on a legal argument advanced by Australian officials that the seabed boundary between northern Australia and Timor Leste was naturally determined where Australia's continental shelf plunged into a trough some 3,000m deep about two-thirds of the way to Timor Leste.

Since then, international law has evolved and a median line has become the generally accepted principle in fixing seabed boundaries between close neighbours.

Indeed, Australia accepted the equidistant approach in more recent seabed border negotiations with the Solomon Islands, New Zealand and France in the Southern Ocean.

Some of the oil and gas fields in the Timor Sea - including Greater Sunrise, one of the biggest - lie outside the joint development area in waters claimed by Australia and now Timor Leste. If Timor Leste can get the border placed at the halfway mark, many billions of dollars in extra royalty and tax revenue will flow to Timor Leste, not Australia.

Both sides were playing hardball until recently. Australia withdrew the dispute from the jurisdiction of the International Court of Justice and continued to take tax revenue of about US$1 million a day from several of the disputed oil fields that lie much closer to Timor Leste than Australia.

Canberra is concerned that if it makes major concessions to Timor Leste on the maritime frontier, its credibility with oil and gas companies will be undermined. It is also worried that Indonesia will demand a renegotiation of its adjacent seabed boundaries with Australia in the Timor Sea that were fixed in the early 1970s, much closer to Indonesia than Australia.

Meanwhile, Timor Leste refused to ratify an agreement between the two nations to split revenues from the disputed Greater Sunrise gas field 80 per cent to Australia and 20 per cent to Timor Leste. As a result, the project was shelved late last year, although it may still be revived.

Australia insists that any solution must give the companies that have invested in the US$5 billion Greater Sunrise project the legal certainty to proceed. It wants any agreement on a permanent maritime boundary with Timor Leste postponed for at least 50 years until the seabed energy reserves are exhausted.

Australia will pay Timor Leste compensation if it accepts these terms. In essence, Canberra appears to be offering more money to Timor Leste through an extra revenue transfer, instead of boundary negotiations. While a deal has yet to be finalised, Timor Leste Foreign Minister Jose Ramos-Horta said shortly before the latest round of negotiations this week that he was confident an agreement could now be reached, possibly by mid-year.

The writer is a visiting senior research fellow at the Institute of South-east Asian Studies in Singapore. This is a personal comment.

Sea has valuable oil and gas fields

IF SOME of the heated rhetoric that has been flying around is a guide, Australia has descended in recent months from the rank of Best Friend to Big Bully in its dealings with Timor Leste... The immediate issue is whether to negotiate a permanent maritime boundary in the 600km of the Timor Sea that separates the two countries and, if so, where to put the line. The seabed in this area contains valuable oil and gas fields that are being exploited or explored by Australian and foreign companies, and may well contain even greater petroleum riches that have not yet been discovered or proven.

------------------------

Associated Press March 11, 2005

Australia, East Timor Are Near An Accord On Oil, Gas Royalties

Talks Involve Framework For Sharing $30 Billion In Seabed Resources

CANBERRA, Australia -- Australia and East Timor have agreed on a framework for sharing US$30 billion in seabed oil and gas royalties, Australia's foreign minister said.

Negotiators representing one of the region's richest nations and one of the poorest met in Canberra for three days this week to discuss where their common maritime boundary should lie in the Timor Sea.

"I think we made very good progress, though there have been times in the past where I thought we were really getting there and it's gone backward," Foreign Minister Alexander Downer told reporters Thursday in Melbourne.

"I think we've got the framework of an agreement nutted out; we've got more details still to work through but I think we're making very good progress with East Timor," he said.

Mr. Downer and his East Timorese counterpart, Jose Ramos Horta, a 1996 Nobel Peace Prize laureate, had predicted last year that an agreement would be settled by last Christmas. But monthlong negotiations broke down acrimoniously in October, with each side accusing the other of derailing a solution.

East Timor's head negotiator, Jose Teixeira, said the new round this week ended with agreement to continue talks soon.

East Timor wants the border to lie in the middle of the 600 kilometers of sea separating the two countries.

But Australia wants the same boundary it set with Indonesia, which occupied East Timor from 1975 to 1999. That boundary is much closer to East Timor.

Australian officials said before the most recent talks that they would seek a "creative solution" that would enable the $5 billion Greater Sunrise gas field -- the largest in the Timor Sea -- to be tapped without the permanent-boundary question being settled.

Woodside Petroleum Ltd. of Australia, one of the companies hoping to pump oil and gas out of the region, shelved the Greater Sunrise project last year because the two countries had failed to broker a revenue-sharing deal by the company's Christmas deadline.

Australia insists that any solution must provide Woodside and its partners with legal certainty to proceed and must postpone any agreement on a permanent maritime boundary for at least 50 years.

Postponing the boundary agreement is aimed at ensuring that it remains in place until the seabed energy reserves are exhausted. Australia would pay East Timor compensation for accepting those terms.

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