Melbourne – Tough negotiations over a Timor Sea oil and gas production treaty are likely to resume between Australia and East Timor later this month in Dili as commercial deadlines loom for a key gas development in the region.
A spokesman for Foreign Affairs Minister Alexander Downer said it was expected the talks would resume toward the end of May after the latest round of negotiations ended last week without resolution.
"There are still some fairly complex issues that need to be resolved, but certainly the atmosphere of the talks was constructive and productive," the spokesman said.
Australia has balked at East Timor's claim for a midway Timor Sea boundary to replace a zone of co-operation between Australia and Indonesia which allowed an equal split of petroleum revenues from a disputed area known as the Timor Gap. The disputed boundary issue has to be renegotiated due to East Timor's move to independence.
Under East Timor's claim the major Bayu-Undan liquids and gas project would be in its waters, while the territory's interim administration says it also has a "compelling claim" to the Laminaria and Buffalo oil fields to the west of the Timor Gap.
Australia has indicated it is willing to shift ground on the revenue split, with some reports suggesting around an 80:20 shift in favor of East Timor, but not on its boundaries.
"We are not advocating changes to the boundaries. We consider we have made a very generous offer to East Timor in terms of the sharing of the revenues from the Timor Gap," Downer's spokesman said.
If Australia concedes upstream revenue to East Timor it would still gain most of the benefit from likely downstream projects, due to a deep underwater trough that would hinder construction of a gas pipeline from the offshore fields to East Timor.
Political affairs ambassador in the East Timor Transitional Government, Peter Galbraith declined on Monday to comment on the talks, but has warned that the July 15 start to the election campaign for East Timor's new government looms as a deadline.
"Clearly there has to be an agreement in place by the date of East Timor's independence or else there will be no applicable legal regime to govern oil and gas exploration in the Timor Sea," Galbraith told Reuters.
East Timor considers the 1989 treaty between Australia and Indonesia covering the maritime area near East Timor as illegal and Galbraith said continuing the terms of the 1989 treaty after independence was not an option. "There is no reason to suppose that something that does not exist legally should then be the basis for an agreement," he said.
Phillips Petroleum Co, which is pursuing a major Timor Sea oil and gas development, wants a new treaty agreed to allow it to commit to a A$1 billion pipeline to bring gas to Darwin, which would trigger further downstream projects. "We need some decision some point early in June, so we can make some decisions sometime in July," Phillips Darwin area manager Jim Godlove said.