Subject: [ETSA] SMH: Gas plant must be on our soil: Timor

The Sydney Morning Herald

Gas plant must be on our soil: Timor By Tom Allard, Foreign Affairs Reporter October 26, 2004

East Timor is making a last-minute attempt to secure a $3 billion liquid natural gas processing plant and pipeline on its soil as negotiations over the Timor Gap oil and gas reserves resume in Dili.

The proposal comes on top of East Timor's demands for up to $5 billion extra in royalties from the Greater Sunrise oil and gas project and its attempt to reset the maritime boundary with Australia.

Timorese officials yesterday argued the plant would offer the fledgling nation new employment opportunities, a chance to diversify and modernise its economy and additional tax revenues.

The Resources Minister, Jose Teixeira, said through a spokesman that the Government would ensure all avenues were exhausted in pursuit of the pipeline and gas plant.

Officials said this meant the plant was formally on the table in the talks, which have broken down on several occasions amid charges from East Timor of Australian bullying, a denial of international justice and looming economic catastrophe.

Going into the Dili meeting, both sides expressed optimism that a deal could be completed before the end of the year, allowing Woodside Petroleum and its joint venture partners to begin the Greater Sunrise project, which will bring in an estimated $15 billion in tax revenue alone over 30 years.

The basic framework of the deal, Australian and Timorese officials say, is that East Timor will agree to defer talks on the maritime boundary in exchange for up to $5 billion in extra revenue from Greater Sunrise.

Progress was made at talks in Darwin last month, and the Prime Minister, John Howard, has spoken twice to his East Timorese counterpart, Mari Alkatiri, since Mr Howard's election victory.

"The discussions towards a creative solution have progressed well," a Government source said last week. Officials said Mr Howard was hopeful of a settlement before Christmas and recognised that a favourable deal for East Timor would be in Australia's security interests.

With an annual budget of $130 million, rising poverty and entrenched and widespread unemployment, East Timor faces a precarious future.

Successful talks on the oil and gas dispute would at least double, and possibly treble, its budget overnight.

It would also give certainty to Woodside and allow it to move to the design and construction phase and find a foundation customer.

However, East Timor's push to be given the contract to host and operate the liquid natural gas plant and pipeline is a late addition to negotiations. Woodside wants to select the site on technical and commercial grounds alone.

Woodside has three possible locations for the plant - East Timor, Darwin and a floating operation.

The Northern Territory Government has made a concerted push for the pipeline and plant. Darwin will begin processing gas from the Bayu-Undan field shortly.

While East Timor gets 90 per cent of the royalties from Bayu-Undan, it claims that most of the economic benefits accrue to Australia through the plant.



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