Darwin – East Timor wanted a maritime boundary with Australia at the midpoint between the two countries, putting key petroleum projects in East Timorese waters, spokesman on Timor Gap issues for the National Council of Timorese Resistance (CNRT) Mari Alkatiri said on Monday.
Alkatiri said the proposal was based on international law for maritime boundaries between nations. "It is the application of international law", he told Reuters. "The law first of all considers 200 miles for each country. There is no 400 miles so we have to go to the midpoint."
The boundary between the two countries is currently undefined, falling within an area known as the Timor Gap, covered since 1991 by a petroleum production revenue sharing treaty between Australia and Indonesia. After East Timor voted for independence last year, Indonesia's position was taken over by the UN Transitional Administration in East Timor and provisional arrangements put in place.
Negotiations to start
Alkatiri said preliminary talks had been held with the Australian Government on a new regime to cover the treaty area and formal negotiation would begin in August/September. "From our point of view the starting point is the maritime boundary," he told reporters after addressing the South East Asia Australia Offshore Conference.
On CNRT's calculation a mid-point boundary between the two nations would run across the southern end of area A within the Timor Gap Zone of Co-operation (ZOCA). Production from the jointly managed area A has totalled around 16 million barrels since output began from the Elang, Kakatua and Kakatua North fields in 1998.
It is estimated less than A$10 million has been distributed to each of the contracting states to date from oil output. But there is the potential for the revenues to the contracting states to reach hundreds of millions of dollars in the next five to 10 years as new projects come on stream. The US$1.4 billion Bayu-Undan liquids project operated by Phillips Petroleum Co is due to produce 100,000 barrels a day of condensate and liquid petroleum gas from 2004.
Gas pipelines to Australia
It also plans to pipeline gas to the Australian domestic market and ultimately begin liquefied natural gas production. Woodside Petroleum Ltd and Shell Australia Ltd, a unit of Royal Dutch/Shell Group also plan to transport gas to Australia from their Greater Sunrise fields.
Twenty percent of the estimated recoverable Greater Sunrise reserves of about 9.5 trillion cubic feet of gas lie within area A of the ZOCA. Alkatiri said downstream projects requiring Timor Sea gas to be piped ashore could only be developed in Australia as a deep underwater trench prevented pipelines to East Timor.
He said the mid-point boundary would bring a substantial increase in revenues to East Timor from royalties, but would not be a major issue for Australia which would have the benefit of the downstream development. "It doesn't affect too much the Australian economy and besides this, the pipelines would go to Australia," he said.
Timor Gap Joint Authority Australian executive chairman Robert Mollah said continued close co-operation would be needed for development of the projects. "Despite where you may put the boundary, for everyone to benefit you really need to have everyone involved," he said. Oil companies have stressed that they are not concerned about the royalties split as long as the tax rate is not changed.
Phillips Petroleum chairman and chief executive officer James Mulva said he was encouraged by assurances by Australia and East Timor that a new treaty would not impair the investments of companies operating in the ZOCA. But he said companies wanted the treatment of gas under a new treaty be settled quickly or there could be project delays. Gas was never fully addressed under the Australia-Indonesia treaty. Alkatiri said it was likely a new treaty could be ratified after mid 2001 when a new East Timorese government was in place.