East Timor gas pact debate at least a month away

Business News
16-August-06 by AAP

East Timor parliamentary consideration of an agreement critical to advancing development of the Timor Sea's biggest gas resource is at least a month away, the young country's energy minister said today.

Oil and gas producers have said they are waiting for the deal to be ratified before committing to development of the Greater Sunrise area, estimated to hold 8 trillion cubic feet of gas and up to 300 million barrels of condensate.

About 20 per cent of Greater Sunrise lies in a Joint Petroleum Production Area between Australia and East Timor and the rest in what Australia calls its exclusive jurisdiction.

East Timorese energy minister Jose Teixeira, 42, told Reuters in an interview it was not his place as part of the executive branch to forecast when parliament would take up the agreement.

But he added: "At least it won't within a month because parliament goes on recess after tomorrow for a month... So at least not within a month, perhaps not two."

Under the JPDA 90 per cent of royalty revenues go to East Timor and 10 per cent to Australia, while the new agreement would share remaining revenues 50-50, potentially delivering up to $19.12 billion to impoverished East Timor over 20 years.

Australia has been putting off its own ratification waiting for East Timor to act first.

Greater Sunrise operator Woodside Petroleum Ltd froze the $6.59 billion project in 2004 while waiting for Canberra and Dili to iron out their differences.

Another sticking point has been whether to build a liquefied natural gas processing plant for Greater Sunrise in East Timor or to use a plant being built in Northern Australia, which Teixeira said was out of the respective governments' hands.

"It's a commercial question for the developers of Greater Sunrise and we've been discussing both with the developers of Greater Sunrise as well as with the investors, other third party foreign investors," he said.

Asked if that issue might hold up a start to the project, Teixeira said: "We're working towards a timeframe of getting all the necessary technical studies done. There's no reason why it should hold it up even more than any other option."

In addition to Woodside, Greater Sunrise's stakeholders include ConocoPhillips, Royal Dutch/Shell and Japan's Osaka Gas Co Ltd. Woodside is 34 per cent-owned by Shell.

East Timor experienced many weeks of violence, arson and looting earlier this year, largely quelled only after an international peacekeeping force began arriving at the end of May, allowing the return of technical advisers who had left.

Teixeira said the turbulence had slowed energy development programs only a "little bit. A month maybe ... mainly because some of the countries that provided technical assistance to us in the way of advisers pulled their advisers out."

East Timor is in the process of awarding some offshore oil and gas deals in areas it controls and is near signing production sharing contracts with Italy's Eni SpA and India's Reliance Industries, who won exploration rights earlier this year, said Teixeira, a lawyer who was educated in Australia.

"The companies have been notified ... and we expect in the first week of September to be signing the production sharing contracts with the two winning bidders."

Production from those deals as well as from Sunrise is not expected to kick in until around 2010 or 2011, but East Timor has already started to get significant revenues from energy projects which the nation of less than a million hopes to use to diversify its economy and for developing health, education and jobs.

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