A question of life or death
East Timor’s President Xanana Gusmao believes his impoverished country of 800 000 people will become a failed state unless Australia relinquishes its claim to 80% of royalties from rich oil and gas deposits in the Timor Sea.
The Timor Sea, which lies between Australia and East Timor, contains two major gas fields — Greater Sunrise and Bayu Undan. It is also rich in oil deposits.
Royalties from these are worth about $21-billion.
Australia is claiming the right to 80% of the royalties from Greater Sunrise and is refusing to agree to an East Timorese proposal that the maritime border between the countries be halfway across the Timor Sea.
East Timor is one of the world’s poorest countries. A report from Oxfam, released last month, says in the past year income per person dropped by 5%, more than 50% of adults are illiterate and 40% of the population lives below the poverty line.
The East Timorese Timor Sea border proposal would place 90% of the oil and gas reserves on East Timor’s side. Australia, however, says its continental shelf should mark the border. This would mean Australia would have right to royalties from resources that are as close as 150km to East Timor’s coastline.
Under the interim arrangements between Australia and East Timor, the East Timorese are able to access 90% of royalties from Bayu Undan, but the Australian government wants the East Timorese government to accept a deal in which 80% of about $9-billion in liquefied natural gas (LNG) royalties from Greater Sunrise would flow to Australia.
Australia had complicated matters by announcing, just two months after East Timor gained independence in 2002, that it would not recognise the jurisdiction of the World Court on maritime matters.
In order to break the impasse, the East Timorese government is pro-posing monthly meetings, but the Australians are in no rush — they are willing to meet only every six months. East Timorese Foreign Minister and Nobel Peace Prize winner, José Ramos-Horta told the media this week that East Timor was also willing to allow the United States to mediate in the dispute.
Further pressure on the Australian government to strike a deal has emerged this week from one of the companies involved in the Sunrise project — the Australian headquartered Woodside.
On Monday, Woodside’s head of gas business, David Maxwell, told an energy conference in Darwin that was attended by East Timorese Prime Minister Mario Alkatiri, “if there are delays to the progress of the project — such as if we are unable to have the international unitisation agreement ratified within the year — then we threaten our ability to start up Sunrise LNG by 2010.”
Alkatiri said his government was prepared to be “creative” in any agreement with Australia over the Sunrise area, while not prejudicing its stance over maritime boundaries.
The potential economic upside for East Timor if it wins its maritime border dispute with Australia is enormous if indications by the Australian government’s energy forecasting agency, Abare, about demand for LNG over the next 10 years, are correct. Abare said this week that Chinese LNG demand could reach 18-million tonnes by 2015. The US also could be importing up to 14-million tonnes of LNG by 2015.
On these estimates it is clear that Gusmao is not exaggerating when he said on May 10 that East Timor’s border dispute with Australia “is a question of life or death”.