Oil companies criticize Timor Treaty delay

By Jane Counsel October 2 2002 Sydney Morning Herald

The key players developing gas resources in the Timor Sea have urged the Federal Government to ratify the Timor Sea Treaty without delay or risk losing billions of dollars in revenue.

The government's Joint Standing Committee on Treaties reconvenes in Perth today to hear public submissions on the crucial treaty, which was signed by East Timor and Australia on May 20 but is yet to be ratified.

The treaty, which sets out how both countries will share the tax revenues generated within the Joint Petroleum Development Area (JPDA) in the Timor Sea, has been dogged by accusations that Australia used unfair tactics to deny East Timor an even greater share of the oil and gas spoils.

But the key players in the JPDA, Phillips Petroleum, Woodside and the Royal/Dutch Shell group, have warned that any unnecessary delays to ratifying the treaty could affect the commercialisation of the gasfields.

"Ratification is essential to give us the legal framework on which to proceed in time for us to meet our contractual obligations," Phillips said in a submission to the committee.

Phillips has a January 2006 deadline to commence deliveries of liquefied natural gas to Tokyo Electric Power, as part of the planned second stage development of its Bayu-Undan gasfield.

"A delay in ratification would have serious financial consequences, not only for Phillips and its participants, but also East Timor for which the need for employment and revenue generation is pressing."

Woodside and its majority shareholder Shell, partners with Phillips in the larger Greater Sunrise gasfield, have also stressed the need to simultaneously ratify both the treaty and an international unitisation agreement to provide greater certainty about developing Sunrise.

The partners are already squabbling over the development options for Sunrise. Shell and Woodside argue the treaty itself does not provide the necessary certainty to develop the Greater Sunrise gas reserves because it is without prejudice to the future delineation of maritime boundaries between Australia and East Timor.

At present only 20 per cent of the Sunrise field falls under the JPDA agreed between Australia and East Timor and 80 per cent is in Australia's deemed resource zone.

But East Timor, supported by expert legal opinion, once the treaty is ratified, will push to define permanent maritime boundaries with Australia which will give the country 100 per cent of the tax take from Sunrise.