Subject: AU: Timor in $2.6bn oil claim

Weekend Australian

Timor in $2.6bn oil claim Nigel Wilson, Energy writer

October 30, 2004

EAST Timor is demanding the Australian Government pay more than $2.6 billion in compensation for oil produced from Timor Sea fields since 1999.

The country, which describes itself as the world's poorest, also wants the companies that invested in developing the Laminaria, Corallina and Buffalo oil fields to pay at least $600 million in compensation for royalties it claims that it should rightfully have been paid.

The huge claim is set to further sour relations between the two countries following the collapse earlier this week of maritime boundary talks.

East Timor's Prime Minister, Mari Alkatiri, said in Perth yesterday the country had a right to be compensated because the fields were in areas over which it claimed sovereignty.

"Our claim is clear because we believe that not only is Greater Sunrise within our area but that Laminaria, Corallina and Buffalo are in the area of Timorese jurisdiction," he said. "Surely, if it is ours, it is ours."

Dr Alkatiri was in Perth for a University of Western Australia geology seminar and for talks with representatives of Woodside and ConocoPhillips, the major partners in the Greater Sunrise gas project in the Timor Sea.

Woodside operates the Laminaria and Corallina fields, which earlier this decade were Australia's largest oil producers at about 140,000 barrels a day.

Natural field decline has reduced production to about 40,000 barrels today.

Buffalo, originally developed by BHP Petroleum and now owned by the Nexen Energy group of Calgary in Canada, is scheduled to cease production by the end of this year.

In Dili on Wednesday, talks on a maritime boundary between the two countries collapsed after East Timor rejected an offer of about $3million to offset the smaller share of revenue it would garner from the the Greater Sunrise development under existing arrangements.

Woodside says it wants the East Timorese to provide legal and fiscal certainty by the end of the year, and has warned the project will stall.

The Dili talks were rocked when East Timor insisted development of Greater Sunrise must result in the gas being piped to a liquefied natural gas plant to be built in the country. This is the least likely of three options now being considered by the Sunrise partners.

Dr Alkatiri said East Timor was committed to develop Sunrise, but would not approve development if it prejudiced the country's aims.

He said East Timor would not be rushed into a decision because it did not believe the end-of-year deadline was real. "What we have been trying to do is defer consideration of the maritime boundary (but) the Australian Government is looking at money only," he said. "We are not looking at money but at sustainable development that will benefit our people."

Dr Alkatiri said he did not believe the dispute would damage long-term relations between the countries.

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