David Lague – An independent East Timor would have a powerful legal case to renegotiate the Timor Gap treaty and win a bigger share of potentially massive oil and gas revenues, according to legal and oil industry experts.

The terms of the controversial treaty between Australia and Indonesia carving up the seabed oil and gas have continued under an interim arrangement with the United Nations Transitional Authority in East Timor, but a new government in Dili would have the right to renegotiate its ocean boundary with Australia. There are potentially billions of dollars in revenue at stake for an impoverished East Timor.

Since the treaty was signed in 1989, it has become accepted under the UN Convention on the Law of the Sea that the exclusive economic zone boundary between two states that are less than 400 nautical miles apart should be the mid-line between their coasts.

If a new government in Dili succeeded in redrawing the boundary to this mid-point, the bulk of the oil and gas Australia shares in the Timor Gap would fall in East Timorese territory.

An oil and gas industry consultant and Timor Gap analyst, Mr Geoffrey McKee, believes the birth of the new nation will clear the way for a new deal. "All our research points to the fact that a settlement in accordance with international norms would be in East Timor's favour. I think this will be settled by international arbitration. If it goes to arbitration East Timor can't lose."

A Canadian lawyer and oceanographer, Mr Jeffrey Smith, has thrown his weight behind legal arguments that East Timor could do better from a new deal with Australia. He is about to publish a lengthy legal paper on East Timor's maritime entitlements, and he also believes that a middle line will become the new boundary.

The Howard Government and the oil industry have been anxious to preserve the existing arrangements to exploit the Timor Gap resources during the transition. A spokesman for the Minister for Foreign Affairs, Mr Downer, said yesterday that the Government was happy with existing arrangements but the future of the treaty was under "active consideration".

The convener of the Australia East Timor Association, Dr Andrew McNaughtan, said yesterday that it would be up to the future government of East Timor to decide how it would deal with Australia on the Timor Gap, but there was now an opportunity to agree on a legitimate oceanic border. "The Timor Gap treaty is a pretty shonky piece of work that is a by-product of Indonesia's illegal occupation and annexation of East Timor and Australia's collusion with Jakarta over this," he said.

There are projections from oil industry sources that government revenues for oil alone from the Bayu-Undan field in the co- operation zone could reach $5.2 billion over 24 years if this went ahead. Under existing arrangements, this would be split evenly between Australia and East Timor. A consortium headed by Phillips Petroleum late last year announced that it would go ahead with initial development of the field.

Critics of the Timor Gap treaty say that Australia had expected a generous deal from Jakarta after recognising its rule over East Timor but that Indonesia had taken a tough line after conceding too much in earlier agreements on common oceanic boundaries. They say the complex treaty with its sharing arrangements demonstrates that the two sides failed to agree on a border.

After initially condemning the treaty, East Timorese leaders have assured the oil industry and the Australian Government that they want the development to go ahead under existing arrangements while East Timor is under UN control, but there have been signals that they will want the border renegotiated as they begin to redevelop their economically backward homeland.

However, in this sensitive transitional phase, the leadership is unwilling to antagonise Canberra or deter the oil industry with claims for a bigger share of revenues.