Subject: AFR: Timor Disputes Oil Deal

Australian Financial Review

December 11, 2003 Thursday

East Timor Disputes Oil Deal

Allesandra Fabro

East Timor has asked Australia to suspend exploiting oil fields in the Timor Sea until it completes a related oil-sharing deal.

Foreign Minister Jose Ramos Horta said East Timor believed international law was on its side in relation to the billion-dollar fields.

"It is our view that these fields Buffalo, Laminaria and Corallina that have been operating under Australian licences are rightfully part of East Timor's sovereign rights," he told the National Press Club in Canberra yesterday.

The oil fields, worth an estimated $US2 billion ($2.7 billion), are on the East Timorese side of the median line between the two countries.

Estimates suggest 75 per cent, or $US1.5 billion worth, of oil has already been extracted from the fields, in which Woodside Petroleum, Shell and BHP Billiton are significantly involved.

East Timor has requested Australia cease production from the fields until the matter is settled. "These fields . . . which we claim fall under our exclusive economic zone on the basis of international law, should rightly be preserved, at least until the conclusion of the maritime boundary negotiations," Dr Ramos Horta said.

He said the Greater Sunrise project, worth about $US7 billion in tax and royalties, of which Australia keeps about 80 per cent, also falls on the East Timor side of the median line. Australia disputes the median line as the most appropriate boundary between the two nations.

About 20 per cent of the Sunrise project, which was the subject of a treaty signed in March this year, lies in the so-called Joint Petroleum Development Area.

Under current JPDA terms, East Timor is scheduled to get 90 per cent of royalties, or about $US4.4 billion, from the area over the next 30 years, but the agreement is only a temporary one, which ceases when the boundary negotiations are settled.

"I'm not an international lawyer . . . but we dont see why it has to take that long . . . particularly when we are dealing with friends," Dr Ramos Horta said.

Dr Ramos Horta said East Timor was disappointed that Australia had only committed to two meetings a year on the negotiations. He met the Minister for Foreign Affairs, Alexander Downer, yesterday afternoon.

A spokesman for Mr Downer said the negotiations were a long and complex process, with a lot at stake.

He said the Australian government was proceeding with the negotiations according to international law and in good faith, and that it was difficult to put a time frame on them.

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