Bruce Hextall – The development of more than $10 billion of oil and gas projects in the Timor Sea moved a step closer yesterday as debate started in the East Timor Parliament to ratify the Timor Sea Treaty.

The treaty, which also needs to be ratified by Australia, sets out the guidelines for the development of vast oil and gas reserves with the joint petroleum development area lying between the two countries.

Ratification will allow the development of the $3.5 billion Bayu-Undan second-stage liquefied petroleum gas project within the development area.

A second agreement covering the unitisation of national ownership of the Greater Sunrise gas project is expected to follow ratification of the treaty, provided maritime boundaries can be agreed on.

Woodside Petroleum and its partners in the $6.5 billion plus Greater Sunrise project are pushing for an agreement to be reached by the end of the year.

A Woodside spokesman said yesterday the agreement would clarify ownership issues between Australia and East Timor as the project partners move to decide on the best development option.

"We certainly think clarification of the issue would be helpful to the investment community," he said, adding the best outcome would be for all issues relating sovereign ownership of the Timor Sea's oil and gas reserves to be settled at the same time. Only 20.1per cent of the Greater Sunrise project area is in the development area covered by Timor Sea Treaty.

The remainder lies in Australian waters but the governments of both countries hope to put in place a agreement to allow an equitable sharing in the project's benefits.

The push for the agreement comes as Woodside, its partners Shell and US-based ConocoPhillips and Osaka Gas are in the the final stages of reviewing developments options for the project.

Woodside and Shell had favoured a floating offshore facility to produce by LNG and liquefied petroleum gas while ConocoPhillips has advocated piping the gas to Darwin.

The Woodside spokesman said a joint-venture committee was studying a full review of the development options in the hope of reaching a decision early next month.

Australia's ratification will not be subject to parliamentary debate, instead being dependent on a recommendation by the Joint Standing Committee of Treaties which Prime Minister John Howard will take to the Governor-General Peter Hollingworth.

Both the Australian and the East Timor governments signed the treaty in Dili on May 20, covering the development area but ratification is needed by both countries to provide a legal framework for the sharing of revenue from oil and gas developments.