Jason Koutsoukis – The $3.5 billion Bayu-Undan natural gas project between Australia and East Timor received a major boost yesterday when a joint federal parliamentary committee recommended ratification of a joint ownership treaty.

The treaty will give project operator Phillips Petroleum the required certainty to proceed with the second phase of the project.

Phillips is contracted to supply 3million tonnes of LNG a year to the Tokyo Electric Power Company and Tokyo Gas for 17 years from January 2006.

Australia has agreed to grant East Timor 90 per cent of the royalties from Bayu-Undan, which would see up to $5.5 billion flow to East Timor over the life of the project.

The chair of the Joint Standing Committee on Treaties, Julie Bishop, said ratification of the treaty was clearly in Australia's interest.

"The treaty provides a framework of legal and fiscal security to ensure the continued development of the resources of the joint petroleum development area," Ms Bishop said.

"Provision of these conditions is paramount if East Timor and Australia are to access the benefits of investment in the exploitation and exploration of the designated area."

Expected revenue to Australia from the Bayu-Undan fields is $2 billion over the life of the project.