Timor-Leste is reported to be offering to bankroll construction of a new pipeline to export gas from the Timor Sea in a renewed effort to kick-start Woodside Petroleum's stalled Greater Sunrise project.
The scheme remains in limbo as Woodside is seeking to exploit the field using floating liquefaction, which it considers most economical, while the tiny nation remains opposed to any development concept that does not include feeding an onshore liquefied natural gas plant on its southern coast.
Secretary of State for Natural Resources Alfredo Pires said Dili is prepared to invest $800 million in a pipeline to help move things forward, using funds from its $14 billion Petroleum Fund, according to Reuters.
"It's an indication of our willingness to take on some of the risks of the project," Pires said, adding it would be a commercial investment and could return around 7%, above the 2% to 3% the fund is currently seeing.
Soaring costs and the prospect of competition from US shale gas to supply Asia customers have already threatened the future of a number of LNG projects around Australia.
Woodside has previously estimated that an onshore plant in Timor-Leste would add as much as $5 billion to analysts' $12 billion cost forecast to develop the fields using floating LNG.
East Timor says a project using an onshore plant would cost $12 billion to $13 billion and that floating LNG faces a greater risk of cost blowouts because it is a new technology.
The Greater Sunrise fields were discovered in the mid-1970s and contain estimated contingent reserves of 5.13 trillion cubic feet of dry gas and 226 million barrels of condensate.
Woodside declined to comment on Pires' offer to invest in a pipeline, pointing to an earlier statement from the Australian independent that it remained committed to developing Greater Sunrise.
"We value our relationships with the Timor-Leste and Australian governments, and seek tripartite alignment to allow the timely development of this resource for the benefit of all stakeholders," it stated.
The latest gambit by the tiny nation is though unlikely to lead to a breakthrough in the project, partly because of its recently launched legal action challenging the validity of the Timor Sea treaty, according to industry insiders.
Timor-Leste claims Australia engaged in espionage during 2006 talks on the treaty's Certain Maritime Arrangements that sets out the fiscal framework for development of such schemes.
The pending litigation throws a further spanner in the works as it requires arbitration between both governments that could lead to a renegotiation of the treaty terms and further delay a decision on the project.