SBS WORLD NEWS AUSTRALIA (6:30 Bulletin 04/05/07)

ETIMOR GAS PLANT WOULD PROVIDE MUCH-NEEDED JOBS

East Timor's political leaders are coming under increasing pressure to spend more of the revenue raised from oil and gas reserves in the Timor Sea. As the country gears up for the second round of the presidential elections next week, the issue is being hotly debated. And as our correspondent in Dili Brian Thomson reports a new row is emerging between Australia and East Timor over where to process some of the gas.

It is a treasure trove of resources located off the coast of one of the world's poorest countries. Hundreds of millions of barrels of oil, trillions of cubic feet of gas worth tens of billions of dollars. But how these resources have been divided up still rankles here. The bulk of the oil and gas lies in three main fields. Australia receives all of the income from Laminaria, 10% of Bayu Undan and, after much haggling, it will get 50% from Woodside's Greater Sunrise. A fair deal until, perhaps, you consider the geography. Under current international legal principles the maritime boundary would be halfway between the two countries, putting all of the fields in East Timorese territory. But Australia argues that the boundary should follow the so-called continental shelf principle which would put the resources in Australian waters.

CHARLES SCHEINER, INSTITUTE FOR RECONSTRUCTION AND ANALYSIS: From a sense of international law, from a sense of justice, from a sense of fair dinkum - if I can use Australian language - it just doesn't fly. These are East Timor's resources.

But that is an argument for the past - East Timor's leaders have accepted the deal and have agreed not to raise the issue of boundaries for the next 50 years. But as one source of friction disappears, another looms. When Greater Sunrise eventually comes on stream a plant will need to be built to process the gas. Australia would prefer that plant to be in Darwin. The East Timorese want it built here. This is a country with staggering levels of unemployment where many people have little else to do but sit and wait and hope for a better future. Constructing the plant here would provide much-needed opportunities.

SANTINA SOARES, OIL AND GAS RESEARCHER: Darwin or Australia, they have so many industry already build there, and then their economy already strong. And Timor Leste is still a long way to be there and this is one things that we need to develop our country.

Roger White has worked in the oil industry for 40 years. He is now an adviser to the government of East Timor. He says despite being an Australian oil company, Woodside won't necessarily favour the Australian option.

ROGER WHITE, GOVERNMENT PETROLEUM ADVISER: If there's a large cost differential in favour of East Timor I'm sure they will favour East Timor. But we still have to work out how big that cost differential may be.

East Timor has already taken in $1 billion in oil and gas revenues and is currently earning an additional $100 million a month. But that money has not been spent. Its leaders have learned from the mistakes of other countries and are investing for the future.

ROGER WHITE: At the moment all the revenue goes into the Petroleum Fund where it is essentially saved, and the nation only spends the income from the petroleum, not the actual capital. So when the oil and gas reserves are exhausted, there should be a sum of money in the bank equivalent in value to what the oil and gas reserves were worth when they were in the ground.

East Timor is already beginning to see the trickle-down effects. The body which administers the income from the oil and gas fields has recently relocated from Darwin to Dili. But such is the nature of the industry and the lack of skills here, only a handful of people have benefited. With elections looming, the Petroleum Fund has become a hot political issue. In a country where most people live on less than a dollar a day there is growing pressure to start spending.

In East Timor, Brian Thomson, World News Australia.