Also: AP: Australia, E. Timor Sign Oil, Gas Treaty

Australia, East Timor sign oil and gas pact

Thu Jan 12, 2006 12:51 AM ET

SYDNEY, Jan 12 (Reuters) - Australia and East Timor have signed an oil and gas revenue-sharing deal for the Timor Sea, one of the last hurdles ahead of a decision by Woodside Petroleum Ltd. (WPL.AX: Quote, Profile, Research) on whether to develop the Greater Sunrise field.

Woodside said on Thursday it would wait for ratification of the pact by both countries before deciding whether to develop the field -- the Timor Sea's biggest gas resource -- at a cost of around $5 billion.

Australian Prime Minister John Howard and East Timor Prime Minister Mari Alkatiri inked the agreement in Sydney, ending more than a year of intermittent talks.

"I am quite confident my parliament will ratify the treaty after some tough questions because it is good for the people of East Timor," Alkatiri told reporters.

Tiny East Timor, which won independence from Indonesia in 1999, is one of Asia's poorest countries.

About 20 percent of Greater Sunrise, which holds an estimated 8 trillion cubic feet of gas and up to 300 million barrels of condensate, lies in the Joint Petroleum Development Area and the rest in what Australia calls its exclusive jurisdiction.

Royalties from the Joint Petroleum Development Area are split 90 percent to East Timor and 10 percent to Australia, while the new agreement shares royalties from the remaining Greater Sunrise area in Australian waters equally between the two nations.

The deal could potentially deliver up to $14.5 billion to East Timor over 20 years.

Woodside has said a decision on the location of a liquefied natural gas (LNG) processing plant had yet to be resolved. East Timor wants the plant built on its soil, while Woodside prefers Wickham Point in Northern Australia where an LNG plant is being built for ConocoPhillips's (COP.N: Quote, Profile, Research) Bayu-Undan project.

Greater Sunrise's other shareholders are ConocoPhillips, Royal Dutch/Shell (RDSa.L: Quote, Profile, Research)(RDSb.L: Quote, Profile, Research) and Japan's Osaka Gas Co. Ltd. (9532.T: Quote, Profile, Research). Woodside is 34 percent-owned by Shell.

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January 12, 2006 03:25 AM ET

Australia, E. Timor Sign Oil, Gas Treaty

SYDNEY, Australia (AP) - Australian and East Timorese foreign ministers signed a treaty Thursday allowing the two countries to share billions of dollars in revenues from oil and gas reserves beneath the sea that divides them.

In a statement, Australian Foreign Minister Alexander Downer said that the deal should clear the way for a multibillion dollar oil and gas project called Greater Sunrise to get underway.

The deal, which must be ratified by both countries' legislatures, gives East Timor, a nation of 800,000 regarded as Asia's poorest country, a major source of income. It "could result in transfers of additional revenue to East Timor of as much as $4 billion over the life of the project," Downer said.

That comes on top of around $6 billion in Greater Sunrise revenues already earmarked for East Timor under a previous agreement, he said.

The treaty signed Thursday also adds to a 90 percent revenue share East Timor will receive under a previous deal covering part of the Timor Sea known as the Joint Petroleum Development Area.

The statement did not specify how much Australia stands to gain out of the deal, but it did say the two countries would "see the equal sharing" of government revenues from the project.

Prime Minister John Howard called the treaty a "fair and just outcome."

"It provides over the years ahead a very important addition to the revenue stream coming to a tiny independent country and that is a very welcome thing," Howard told reporters in Sydney.

Ending months of acrimonious negotiations, Australia and East Timor also agreed Thursday to shelve for 50 years a long-running dispute over the Timor Sea maritime boundary that separates them.

Australia originally sought to keep the same border it negotiated with Indonesia, which occupied East Timor from 1975-1999. That border comes within 90 miles of East Timor's coast in some areas, and would place most of the natural resources in the Timor Sea under Australia's control.

East Timor wanted the border drawn in the middle of the 370 miles of ocean separating the two countries, which would have placed a significant portion of the resources under Dili's control.

Australian lawmakers and rights activists have accused Canberra of stealing revenue from its poverty stricken neighbor by trying to claim the Greater Sunrise field.

But East Timor's Foreign Minister Jose Ramos-Horta insisted the treaty was "a fair and just deal for the two sides."

"We are happy. Finally after two or three intense years we have this agreement," he told The Associated Press after the meeting. "This is what you call a win-win solution."

The dispute had threatened to derail the multibillion dollar oil and gas project. In 2004, energy companies shelved plans to tap the reserves after Canberra and Dili failed to resolve the border issue.

Australian oil company Woodside Petroleum Ltd. and its partners in the Greater Sunrise project, regarded as the richest prize in the Timor Sea, are still to decide whether they will start pumping oil and gas.

Woodside owns 33.4 percent of Sunrise, situated 93 miles south of East Timor's southern coast. Its partners are ConocoPhillips with 30 percent, Royal Dutch Shell PLC with 26.6 percent and Japan's Osaka Gas Co. with 10 percent.

Woodside said there would be no immediate decision on resuming work at Greater Sunrise.

"The first step for us is to understand what's in the agreement," Woodside spokesman Roger Martin said, then Australia and East Timor must ratify the deal, "so there are a few more steps along the way."