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Thursday November 11, 5:54 PM INTERVIEW: E Timor PM In No Hurry For Sunrise Gas Deal

By Phelim Kyne

Of DOW JONES NEWSWIRES

BEIJING (Dow Jones)--East Timor's Prime Minister Mari Alkatiri told Dow Jones Newswires Thursday his government won't rush a deal with Australia to develop the Greater Sunrise natural gas project in the disputed Timor Sea.

A December deadline to seal an agreement on the gas field development "isn't at all possible" unless East Timor's concerns about maritime boundaries and project participation are addressed, Alkatiri said.

Alkatiri spoke on the sidelines of the Business Week eighth annual CEO Forum in Beijing.

Talks between the two sides to kickstart Sunrise, a $5 billion gas field exploration and development project operated by Woodside Petroleum Ltd. (WPL.AU), broke down last month.

Woodside holds a 33.4% stake in the field, while partners ConocoPhillips (COP), Royal Dutch/Shell Group (RD) and Japan's Osaka Gas Co. (9532.TO) hold shares of 30%, 26.6% and 10% respectively.

"The sooner (a deal) the better, but I'd like to make it clear we aren't rushing," Alkatiri said.

"We are committed to the development of Sunrise and Woodside has invested a lot of money there....we're still waiting for another proposal from Australia and maybe another round of negotiations."

Alkatiri said that East Timor didn't feel bound to finalize an agreement ahead of a December deadline he said was decided by Australia and Woodside.

Woodside wants to initiate a detailed design phase for one of three project development options by the end of 2004.

Those options include shipping gas to a liquefied natural gas plant in Darwin, a floating LNG plant at the field, or piping gas to an LNG plant in East Timor.

But Alkatiri said his government won't sign off on a Sunrise deal unless Australia recognizes East Timor sovereignty in the gas field area and gives the country an active role in the project.

"Australia tried to get us to give up our claim on resources in return for financial compensation," he said.

"But participating in (gas) exploration and exploitation will give us the opportunity to develop our own capacity and skill in this field and as a small country we would also like to develop our capacity and not just have money."

Earlier Thursday, Australia's Industry and Resources Minister Ian Macfarlane told Dow Jones Newswires that East Timor's government must return to the negotiating table with more realistic expectations if the protracted maritime boundary dispute between Australia and the impoverished nation is to be resolved.

East Timor Eyes Investment From China

Australia offered East Timor about A$3 billion in additional tax revenue in return for deferring maritime boundary talks for 100 years, the Sydney Morning Herald newspaper reported, citing unnamed Australian sources.

"We were disappointed. We made what we thought was an extraordinarily generous offer and the Timorese have decided not to negotiate on that offer or even, it seems to us, give it serious consideration," said Macfarlane, with divulging any of the details.

"The ball is now very squarely in the Timorese government's court. If they want Sunrise to proceed, then it's really up to them to show that they have a reasonable expectation in this process."

Alkatiri conceded that East Timor is in desperate need of aid and investment money

East Timorese voted overwhelming for independence from Indonesia in 1999, prompting pro-Indonesian mob violence that left the island's economy and infrastructure in ruins.

East Timor, a former Portuguese colony that was invaded and annexed by Indonesia in 1975, gained statehood in 2002.

The new country's government is grappling with stunted economic development amid double-digit unemployment and a 50% illiteracy rate.

Alkatiri said he's confident that a package of business laws that will be passed by East Timor's government by early next year will help jump-start new interest among foreign investors from countries including China.

Potential investors from China include garment manufacturers and petroleum companies.

"We are already cooperating with China in researching and surveying oil and gas onshore...and if they are willing the can take part in public tender for oil and gas exploration," he said.

Last month's inauguration of Indonesia's President Susilo Bambang Yudhoyono would help strengthen political and economic ties between Indonesia and East Timor.

The former army general won a landslide victory in September's election on a platform of tackling corruption and reviving economic growth.

"President Yudhoyono is (from the) military and has a bit more (political) influence," Alkatiri said.

"We need a solid Indonesian democratic system with enough authority to deal with each other and I think Yudhoyono and the new government and parliament can be strong."