East Timor Dispute Could Hurt Sunrise Gas Plan

The Wall Street Journal: East Timor Dispute Could Hurt Sunrise Gas Plan

 

DOW JONES NEWSWIRES

June 2, 2004 7:01 p.m.

By Eric Johnston

Of DOW JONES NEWSWIRES

Posted 3 June 04

 

MELBOURNE — A long-running territorial dispute between Australia and East Timor over the huge Sunrise gas fields is unsettling customers and threatens to delay the multibillion dollar project.

 

While the Sunrise partners haven’t yet agreed on development options for the lucrative gas fields, the Australian arm of Royal Dutch/Shell (RD) said the border uncertainty is hurting marketing efforts.

 

Shell Australia Chairman Tim Warren on Wednesday conceded the project wasn’t “moving forward as fast as we’d all like” while the two nations are at loggerheads over the maritime boundary that separates them.

 

As marketing efforts continue, management of the project “would move more easily if the customers were absolutely sure there were no obstacles in the way,” Warren told reporters.

 

His comments come as East Timor’s Prime Minister Mari Alkatiri is expected to step up criticism of Australia at a regional energy conference in Darwin next week.

 

Alkatiri has accused Canberra of defying international law with its claims over seabed oil and natural gas deposits between the neighboring countries, taking advantage of one of the world’s poorest nations.

 

Just two months before East Timor became independent from Indonesia in May 2002, Australia announced it would no longer accept the jurisdiction of the International Court of Justice on maritime borders.

 

That left the East Timorese with no independent forum to judge their claim that the border should be drawn in the middle of the 600 kilometers of sea separating the two countries.

 

That would place 90% of Timor Sea oil and gas reserves on East Timor’s side. The shift would also locate Sunrise and a nearby Bayu Undan gas field wholly in East Timor’s waters.

 

Australia wants its continental shelf to be the border as was agreed with Indonesia. In some places that is just 150 kilometers from East Timor’s coastline and more than 450 kilometers from Darwin.

 

Under an interim agreement, East Timor gets 20% of the Greater Sunrise gas field, the richest in the area. Australia takes 80%. That deal will lapse once the two nations agree on a definitive boundary.

 

But East Timorese negotiators claim Australia is dragging out talks so it receives the lion’s share of royalties from existing Timor Sea oil and gas fields.

 

While Shell is confident the Australian and East Timorese governments will find a resolution to the dispute, the oil giant would be “very reticent” about significantly increasing investment on Sunrise until an agreement is ratified, Warren said.

 

Shell has a 26.6% stake in the Sunrise project. Other partners in the 7.7 trillion cubic feet field are ConocoPhillips (COP) with 30%, Australia’s Woodside Petroleum Ltd. (WPL.AU) with 33.4% and Japan’s Osaka Gas Co. (9532.TO) with a 10% stake.

 

Warren wouldn’t commit to an onshore or offshore processing facility for the field, saying these decisions will be made after enough customers have been secured to underpin the project.

 

Shell and Woodside have previously backed a floating liquefied natural gas facility for Sunrise, while ConocoPhillips has argued in favor of a pipeline to Darwin.

 

ConocoPhillips is separately building a US$1.5 billion LNG plant at Darwin as part of its Bayu Undan project.

 

Woodside has suggested the possibility of piping gas to an onshore East Timor LNG facility, as a third option.

 

-By Eric Johnston; Dow Jones Newswires; 61-3-9614-2663; [email protected]

 

-Edited by Graham Morgan

 

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