Subject: RDTLGov: Bayu-Undan Ready to Proceed

Media Release: Bayu-Undan Gas Development Ready to Proceed

RDTL Government June 13, 2003

Today, the Timor Sea Designated Authority approved the gas phase amendment to the Bayu-Undan Development Plan submitted by the operator, ConocoPhillips. This act represents the final step needed to permit the multi-billion dollar Bayu-Undan gas development to proceed.

This approval follows other recent developments relating to the gas phase of the Bayu-Undan project. Last week, the Timor-Leste National Parliament approved the Bayu-Undan tax legislation by an overwhelming majority. The first bill, 'The Taxation of Bayu-Undan Contractors Act', was passed on Tuesday 03 June. This legislation establishes a tax regime for the Bayu-Undan development. The second bill, 'The Timor Sea Petroleum Development (Tax Stability) Act', was passed in a special plenary session on Thursday 05 June. Both laws were promulgated by Timor-Leste President Xanana Gusmao on Friday 06 June. The promulgation of the Timor Sea Petroleum Development (Tax Stability) Act has enabled the Timor-Leste Government to enter into a tax stability agreement with the Bayu-Undan joint venture partners.

Timor-Leste Minister for Planning and Finance Madalena Boavida signed the Agreement on Monday 09 June.

Timor-Leste Prime Minister Marí Alkatiri said today, "It is a relief that all matters in order for the Bayu-Undan gas development to proceed have been resolved. It has been a long and difficult path and I am pleased that Timor-Leste can now properly plan for the future development of our country thanks to revenues from Bayu-Undan."

The Bayu-Undan development will proceed under the terms of the Timor Sea Treaty, which provides for Timor-Leste to receive 90 per cent of production and taxation rights, and Australia 10 per cent. The Treaty governs the development of petroleum resources in an area of the Timor Sea which lies on Timor-Leste's side of the median line between Timor-Leste and Australia. The Treaty is an interim arrangement pending the delimitation of permanent maritime boundaries between the two countries. The Treaty was signed on 20 May 2002 by Timor-Leste Prime Minister Marí Alkatiri and Australian Prime Minister John Howard, and entered into force on 2 April 2003. The combined gas and liquids development of Bayu-Undan is estimated to bring total revenues to Timor-Leste, over the estimated 17 year life of the field, of US $3 billion. If Timor-Leste and Australia agree boundaries which are consistent with international law, the likely revenues to Timor-Leste from the Timor Sea will be greater.

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