Dow Jones Newswires November 7, 2000

East Timor Receives First Oil Royalties From Australia

SINGAPORE -- Newly independent East Timor received its first oil royalty payment from Australia last week, according to an Australian official at the department of Industry, Science and Resources.

The payment of A$6 million (US$1=A$1.89) covered royalties on production from the Elang oil fields, located in Area A 91-12 of the jointly administered Zone of Cooperation.

The Zone of cooperation - which is split into three sectors - covers an area of disputed offshore territory rich in hydrocarbons stretching between Australia's northern coast and East Timor.

East Timor wants to renegotiate the terms of the existing Zone of Cooperation treaty, agreed between Australia and Indonesia in 1989. However, it signed a memorandum of understanding with Australia in February, temporarily maintaining the 50-50 Zone A royalty split in force between Australia and Indonesia prior to East Timorese independence.

The first round of treaty renegotiation took place between the Australian government the provisional East Timorese government Oct. 9-11 in East Timor's capital, Dili. East Timor wants a redrawing of the treaty's boundaries, and a larger share of royalties.

A date for the second round of talks has yet to be fixed.

The Australian official pointed out that A$150 million in aid has been earmarked for East Timor over the next four years. This figure could fall if East Timor's revenue from oil royalties rises.

Currently, only the Broken Hill Proprietary Co. (BHP)-operated Elang fields, comprising Elang, Elang West and Kakatua, are producing oil in the treaty area. But there are a number of producing fields in offshore territory very close by, including the Woodside Petroleum Ltd. (A.WPL)-operated 150,000-barrel-a-day Laminaria-Corallina field. It is unclear whether these fields lie in territory disputed by East Timor.

Royalties will rise once liquids production begins at the giant Phillips Petroleum Co. (P)-operated Bayu Undan gas and condensate field, which, like Elang, is located in Zone A 91-12 of the treaty area. Philips issued initial engineering contracts for Phase One of the field development - comprising condensate and liquid petroleum gas production - in October.

-By Jeremy Bowden, Dow Jones Newswires; 65-421-4814; jeremy.bowden@dowjones.com

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