Subject: KY: E. Timor, Australia to begin sea boundary talks in Oct.

E. Timor, Australia to begin sea boundary talks in Oct.

DILI, East Timor, Aug. 26 Kyodo

U.N.-administered East Timor and Australia will commence maritime boundary negotiations in October, with East Timor seeking a median line giving it sovereignty over proven petroleum reserves, a senior East Timorese official said Saturday.

The initial round will be held in Dili, East Timor's capital, Mari Alkatiri, economics affairs minister in the East Timor transitional government, told a congress of the National Council of Timorese Resistance (CNRT), an umbrella organization of the territory's main independence political groups.

Alkatiri said East Timor wants the two countries' maritime boundary to be equidistant, which would put all the current oil and gas activity in the Timor Gap, a coffin-shaped parcel of the Timor seabed, on East Timor's side.

It has been estimated the half-island state could receive as much as $100 million annually in Timor Gap revenues by the latter part of this decade under a mid-point boundary demarcation.

The 1989 Timor Gap Treaty signed by Australia and Indonesia, which invaded East Timor in 1975 and occupied it for 24 years, is now void, but the United Nations has arranged with Australia to continue its terms until East Timor gains full independence late next year.

The CNRT, however, has made clear that an independent East Timor will not even temporarily extend the terms of the treaty, which it considers illegal.

Alkatiri faced CNRT critics who suggested that international oil companies that profited from Timor Gap oil and gas during Indonesian occupation should be barred from operating there in the future.

'We can't just kick them out,' he said. '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.'

Just last October, he noted, Phillips Petroleum Co. gave the go-ahead for the $1.4 billion gas recycle development phase of the Bayu-Undan project, the largest investment proposed to date in the Timor Sea.

The commitment was made after the CNRT pledged any future arrangements on the Timor Gap would not damage the interests and rights of companies already operating there.

Alkatiri said that when production begins by late 2003, East Timor's new government will acquire badly needed budgetary resources at a time when international support received since last year's vote for independence will have greatly decreased.

Delegates to the congress also called for U.N.-led negotiations with Australia to be suspended until East Timor gains its full independence so that East Timor's interests are not sacrificed by foreigners.

Alkatiri disagreed, saying negotiations should start soon to prepare a new treaty before independence, which would in any case not go into effect until ratification by the new parliament to be set up after independence.

East Timorese leader Jose Ramos-Horta, meanwhile, told Kyodo News he felt optimistic about the negotiations, citing the Australian government's 'sympathetic' attitude.

He said revenue from the Timor Gap, while just a 'drop in the bucket' for Australia, has tremendous implications for devastated East Timor, which is striving to achieve a measure of economic self-sufficiency.

Ramos-Horta raised eyebrows last May when he said East Timor was entitled to 90% of royalties from the Bayu-Undan project and Australia 10%. Under existing arrangements, Australia and East Timor would share royalty benefits equally.

Alkatiri stressed the need for a new legal instrument so as not to retroactively legitimize the 1989 treaty, which many East Timorese view as a tradeoff for Australia's recognition of Indonesian rule of East Timor.

'We refuse to accept that East Timor be the successor state to Indonesia to the treaty,' he said.

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