Negotiations on the future of the Timor Gap Treaty between the Australian government, the United Nations Transitional Administration for East Timor (UNTAET) and East Timorese representatives are set to resume on October 9-11 in Dili. Both the federal and Northern Territory governments have indicated that they are opposed to any renegotiation of the treaty that would result in a change in the maritime boundary between Australia and East Timor in the latter's favour.
When Ashton Calvert, the secretary of the Department of Foreign Affairs and Trade, announced on August 3 that the next round of talks on the treaty had been pushed back to later in the year, he made the government's stance clear.
"Australia will of course be sensible and reasonable and fair", he said, but "we don't start with a position where we think the thing [the treaty] is in any way lopsided to begin with".
Calvert added that it was "a natural aspiration by the East Timorese that they get a bigger share out of this whole arrangement" and that they will want "more than the status quo".
Canberra's negotiating position will aim to frustrate, rather than facilitate, this "natural aspiration".
A joint press release issued on September 18 by the minister for foreign affairs, the minister for industry and the attorney-general stated that the main priority for the negotiations is to "avoid a legal vacuum" and provide "commercial certainty for the petroleum industry".
The current memorandum of understanding regarding the treaty (signed by UNTAET and the government in February) expires with East Timor's full independence and first elections, which are scheduled for 2001.
According to foreign minister Alexander Downer, as far as the Australian government is concerned, "There shouldn't be much debate" about the maritime boundary. Negotiations should be centred mainly on the issue of royalty distribution, he said.
Downer also believes that East Timor is not in a strong position to argue for a greater share of royalties, because Australia "is already providing a lot of financial support for East Timor".
If the maritime boundary between Australia and East Timor was re-established according to international laws and norms, East Timor would gain sole sovereignty over an area containing some of the largest oil and natural gas fields known to exist in the Timor Sea.
The Howard government's defence of the present terms of the treaty is based upon the position that it held before the East Timorese voted for independence — that the interests and profits of large corporations are more important than the livelihood of the East Timorese.
Many people, including the East Timorese themselves, consider that the current treaty is "lopsided" in favour of Australia. They point out that the treaty was able to come into existence in the first place only because the Australian government recognised the illegal occupation of East Timor by Indonesia.
Over the past 18 months, representatives of the largest Timorese political organisation, the National Council of Timorese Resistance/National Congress (CNRT/NC), have publicly stated that an independent East Timor will not impose higher rates of taxes or levies upon mining companies than those currently outlined in the treaty.
CNRT/NC leader Mari Alkatiri stressed this during the organisation's national congress, held in late August. "They've invested a lot, so we have to respect the commitments they've made and give them guarantees that they will not lose everything", he said.
Alkatiri added, however, "We refuse to accept that East Timor be the successor state to Indonesia to the treaty".
This sentiment was also expressed by Peter Galbraith, the director of political affairs for UNTAET, during a seminar held in Canberra in July, entitled "East Timor and its Maritime Dimensions: Legal and Policy Implications for Australia".
Galbraith told participants that the UN had never recognised the legality of the treaty and that East Timor was not prepared to accept a successor-state model for its continuation.
What is at stake is billions of dollars' worth of investment and profits. According to the September edition of the NT Business Review, if projects currently under consideration in the Timor Sea are realised, the expenditure for mining and exploration companies will be in the order of $12 billion.
Much of this is earmarked for the area known as the "zone of cooperation", and fields close to it, which could change hands if the treaty's maritime boundaries are redrawn.
The Northern Territory is especially dependent on the income generated by the mining and exploration industry. Not surprisingly, the NT chief minister, Denis Burke, has been outspoken in opposing any changes to the treaty that could threaten investment in the territory. Earlier this year Burke claimed that the treaty is "probably the best deal" the East Timorese could expect.
With the record high price of oil, the return on oil and gas developments in the Timor Sea holds even greater appeal for mining and petrochemical companies. Over $8.5 billion worth of oil was produced in the Timor Sea from 1986 to March 2000.
Woodside Energy, for example, has posted a record half year profit of $436 million as a result of commercial production at the Laminara/Corallina field, which came on line last November. A promotional advertisement in the NT Business Review by Woodside states that 25 million barrels of oil have been extracted in the first six months of operation.
The most significant developments are based on tapping the huge natural gas reserves, such as the Bayu-Undan field, where US-based Phillips Petroleum plans to invest $2.2 billion in the liquid stripping phase to facilitate production of 400 million barrels of LPG and condensate. Multiplex has signed a letter of intent with Phillips to construct a 500-kilometre pipeline to Darwin.
The world's largest producer of methanol, the Canadian-based Methanex, has also signed a letter of intent with Shell and Woodside. The two oil companies will supply Methanex with natural gas for a $1.5 billion methanol plant to be located at Glyde Point near Darwin.
BY JON LAND