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THE NEW YORK TIMES: East Timor, Australia Make Breakthrough on Gas Dispute

THE NEW YORK TIMES: East Timor, Australia Make Breakthrough on Gas Dispute

30 April 05

By REUTERS

MELBOURNE (Reuters) – Tiny East Timor has agreed to shelve talks on a permanent sea border with Australia in exchange for billions of dollars in revenues from yet-to-be developed offshore gas fields, Australia’s top negotiator said on Friday.

The pact postpones establishment of a border across the Timor Sea for up to 60 years in exchange for more revenue from the Greater Sunrise gas field, which Australia-listed Woodside Petroleum Ltd. wants to develop at a cost of A$6.6 billion ($5.1 billion).

The agreement, which still requires official approval by both governments, follows years of wrangling between the two neighbors over how to divide the gas.

“This is a very positive and a very good outcome,” Doug Chester, chief negotiator for Australia, told Reuters by telephone from East Timor’s capital Dili.

“East Timor has offered to put aside boundary negotiations for 50 to 60 years and in return East Timor will get some additional revenue.”

Australian Foreign Minister Alexander Downer said the pact would be worth an additional A$2 billion to A$5 billion for East Timor, which gained independence in 2002 after centuries of Portuguese colonial rule and 24 years of occupation by Indonesia.

Until a permanent boundary exists, revenues from oil and gas fields from a shared 23,900 square mile zone are split 90:10 in East Timor’s favor.

The Greater Sunrise field straddles the shared zone with 20 percent falling inside the zone and 80 percent in Australian waters.

“We’re talking about them getting several billion dollars of additional revenue over and above what they would have otherwise got just from the 90 per cent revenue from the joint development area,” Downer said.

Woodside halted development plans for the field late last year amid disagreement from both sides.

“We welcome this progress in the negotiations though we have not yet seen the detail. But any agreement will require ratification from the parliaments of both Timor Leste and Australia,” Rob Millhouse, a spokesman for Woodside, said.

The Greater Sunrise field has an estimated 8 trillion cubic feet of gas and up to 300 million barrels of condensate.

The dispute is just one of many competing territorial claims in Asia that are hampering development of potential oil and gas reserves.

The South China Sea region, where most of the disputes center, has proved oil reserves of some 7 billion barrels and production of about 2.5 million barrels per day (bpd), a 2003 U.S. government study showed.

East Timor and Australia have been feuding about the location of the sea boundary since East Timor voted to break away from Indonesian rule in 1999.

East Timor, which is largely dependent on foreign aid, has argued the sea border should be drawn at a midpoint between Australia and East Timor, but Australia has said the boundary is defined by the continental shelf, which in some places lies less than 50 miles from East Timor’s southern coastline.

Woodside has a 33.4 percent stake in Greater Sunrise, ConocoPhillips has 30 percent, and Royal Dutch/Shell 26.56 percent. The balance is held by Japan’s Osaka Gas Co. Ltd.

Woodside is 34 percent-owned by Shell. Woodside shares ended 1.05 percent down at A$23.50 in a weaker overall market.

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