EAST TIMOR: Dirty deals in the Timor Sea

May 15, 2002


On the eve of East Timor's independence on May 20, the crucial issue of the Timor Gap has still to be fully resolved. East Timor may lose billions of dollars in oil and gas royalties if the Australian government and the large petrochemical companies get their way.

The Australian government is pressuring East Timor to sign the terms of the Timor Sea Arrangement, which was established last July. This memorandum replaced the Timor Gap Treaty (signed between Australia and Indonesia in 1989) and will form the basis for a new treaty on the disputed maritime boundary between East Timor and Australia.

According to the Timor Sea Arrangement, East Timor will receive a 90% cut of the royalties in the Joint Petroleum Development Area. East Timorese political leaders, non-government organisations and solidarity groups have expressed concerns that a treaty based on this memorandum will still prevent East Timor from receiving its fair share of royalties.

In April, East Timor's chief minister Mari Alkatiri stated that East Timor would like to sign a new treaty on May 20, but that "the agreement should not compromise East Timor's position and that we will approve legislation on the basis that our maritime frontiers are very clear". Australian foreign minister Alexander Downer stated there might be delays with the signing of the treaty due to "technical differences".

Prior to the signing of the memorandum, Australian representatives, such as Downer, tried to intimidate East Timor into accepting a much lower share (initially 50-60%), hinting that aid to East Timor would be reduced if this did not happen.

The giant US petrochemical company Phillips Petroleum also accused the East Timor government of derailing development in the Timor Sea because it has proposed changes to the taxation regime for companies operating there.

The Australian government's decision to back down and agree that East Timor take a 90% share of the royalties was a significant victory, because it had repeatedly argued during negotiations in 2000 and 2001 that the terms of the original treaty with Indonesia were fair and should not change. In doing so, Canberra was attempting to deny East Timor the right to control the biggest and most lucrative oil and gas fields in the area.

The United Nations Transitional Administration in East Timor and East Timorese representatives were able to force this retreat from the Australian government because of two factors: first, because of the still strong domestic and international support for East Timor's right to independence meant that many understood the importance of oil and gas reserves to East Timor's future development; and second, because of East Timor's legal rights under international law.

Under the statutes of the UN Convention on the Law of the Sea (UNCLOS), East Timor has a rightful claim over all the sea-bed resources on its side of the mid-point between Australia and East Timor. This would give East Timor full control over the large Bayu Undan gas reserve, currently being developed by a joint venture headed by Phillips. Bayu Undan will generate around $2 billion for East Timor.

According to some legal experts, changes to the maritime boundary in line with UNCLOS would also take in most, if not all, of the Greater Sunrise field as well as the Corallina/Laminaria fields.

All these fields have significant known and potential oil and gas reserves. The Corallina/Laminaria fields are already operational and provide the Australian government with $200-300 million in royalties annually. Greater Sunrise is just over twice the size of Bayu Undan.

Because Greater Sunrise overlaps the border, a special annex in the Timor Sea Agreement proposes that East Timor receive just 18% of the royalties derived from the field.

However, a workshop on legal and development issues in the Timor Gap, held in East Timor on March 23 24, concluded that East Timor had a case in pushing for all or most of the royalties from the Greater Sunrise field. A new treaty signed on the basis of last year's memorandum would result in East Timor missing out on at least $55.8 billion in royalties from Greater Sunrise and other potential fields.

"What we are seeing is more lies and hypocrisy from the Australian government", Max Lane, chairperson for Action in Solidarity with Asia and the Pacific, told Green Left Weekly. "It likes to claim it has done so much for the East Timor, yet all along it has sought to steal as much of the Timorese people's oil and gas wealth as possible", he added.

On March 26, the Australian government announced that it would no longer accept decisions handed down by the International Court of Justice, the international body that arbitrates on maritime boundary disputes. In response, Alkatiri said that "the withdrawal of Australia from the ICJ is in our opinion a sign of a lack of confidence in us, and an unfriendly act".

"The Australian government has, yet again, shown its total disregard for international law and conventions, as it is doing with its treatment of refugees", Lane added. "It is another example of the Australian government's bullying of small countries in the region, aimed primarily at increasing the ability of big multi-national and Australian-based companies to extract super-profits without constraints".

[For more information about the struggles in East Timor, Aceh, West Papua, and Indonesia, visit the Action in Solidarity with Asia and the Pacific web site at <http://www.asia-pacific-action.org>.]

From Green Left Weekly, May 15, 2002.
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