Jane Counsel – Delicate negotiations over a new Timor Gap revenue sharing agreement were further unhinged yesterday, after a small American group launched legal action against the Federal and Indonesian governments and Phillips Petroleum.
Colorado-based PetroTimor, which is owned by Oceanic Exploration and the East Timor government, is seeking up to $2.85 billion in damages over a disputed exploration concession covering part of the Timor Gap treaty zone. The legal action, launched in the Federal Court, threatens to derail negotiations over a new Timor Gap revenue sharing agreement, which remains stalled over East Timor's push for a greater share of the spoils.
The Timor Gap treaty, signed by Australia and Indonesia in 1989, carved out a revenue-sharing arrangement over the middle portion of the Timor Sea between the two countries. But PetroTimor claims the pair formed an illegal agreement and it is now seeking official recognition of a concession it was granted over the same area by Portugal before Indonesia invaded East Timor in 1975.
PetroTimor was forced to flee East Timor before it could start exploration on the concession and claims it has since spent 15 years trying to convince Indonesian and Australian officials of the validity of its claim. A spokeswoman from the office of Attorney-General Mr Daryl Williams said "any proceedings brought against the Commonwealth Government will be defended vigorously".
US group Phillips Petroleum, which is heading up the proposed $U1.5 billion Bayu-Undan project within the jointly administered zone of the Timor Sea, was named as the third defendant to the action. But Phillips said it was confident that its exploration and production contracts in the disputed area were legally valid. "We have every confidence in these contracts being upheld," Phillips Darwin manager Mr Jim Godlove said.
The legal action was launched on the same day that Phillips met Federal Government representatives in Canberra to discuss the Timor Gap issues. Phillips has already postponed a second-stage proposed gas pipeline project due to East Timor's unfavourable tax regime.