Subject: AP: E. Timor's Future May Lie in Sea
Date: Sat, 24 Jul 1999 12:12:40 -0400
From: "John M. Miller" <>

Received from Joyo Indonesian News:

AP-NY-07-21-99 0235EDT

E. Timor's Future May Lie in Sea By ROHAN SULLIVAN

SYDNEY, Australia (AP) - Locked beneath the strip of sea separating Australia and the island of Timor is enough oil and gas to fuel a small nation.

If East Timor, the restive territory covering half of the island, breaks away from Indonesia and becomes a new nation, perhaps as soon as next year, its political leaders will be looking to do just that.

Securing peace in the territory - wracked by violence between separatists and the Indonesian army for 23 years, and more recently by anti-independence militias - is one essential element to establishing a new nation.

Another will be finding revenues to bolster what is now a small agrarian economy and to replace government funds that come from the faraway Indonesian capital of Jakarta.

First, the East Timorese must decide on an Indonesian offer of greater autonomy for their territory in a U.N.-sponsored referendum now planned for Aug. 21 or 22. President B.J. Habibie says Indonesia will let East Timor go if the offer is rejected.

``East Timor will have a heavy dependence on oil revenues and foreign aid'' if it chooses independence, said Michael van Langenberg of Sydney University's School of Southeast Asian Studies.

Portugal, the former colonial ruler, Australia, Brazil and other nations have pledged aid if East Timor does become independent.

Going it alone would mean wading into complicated commercial matters. Exploration and exploitation rights for the Timor Gap, an international zone that falls between the territorial waters of Australia and Timor, is governed by a complex treaty.

The pact was signed in 1989 after more than two decades of negotiations between Australia and Indonesia, made possible only by Australia's 1976 decision to recognize Indonesian sovereignty over East Timor.

Indonesia invaded the former Portugese colony in 1975 and annexed it the following year. The United Nations and most countries still recognize Portugal as the administering power.

Despite covering only oil and not natural gas, which is increasingly being found in the region, the Timor Gap treaty was welcomed by resource companies and exploration has boomed.

Current production is small, but Australian officials say the region is one of the richest new hydrocarbon areas outside the Middle East.

An estimated $2.1 billion has been spent to explore and tap the oil pools so far. Industry insiders estimate the region holds the potential for producing $11 billion in revenues.

The boundaries under the treaty form a coffin-shaped zone that divides administration and ownership among two national and two state governments.

The northern part is administered by Indonesia, with Australia holding rights to 10 percent of royalties on any oil found. The southern part is administered by two Australian state governments, with Indonesia having 10 percent royalty rights.

In between is a 23,552-square-mile ``zone of cooperation'' administered jointly by Australia and Indonesia, where royalties on any oil found are split 50-50.

Phillips Petroleum Co., based in Bartlesville, Okla., currently pumps 33,000 barrels of oil a day from its Elang, Kakatua and Kakatua North oil fields and has rights to exploit other fields in the Australian zone and the zone of cooperation, including the Bayu-Undan gas field, which is due to be in production by early 2003.

The Australian company Woodside Petroleum Ltd. expects its $890 million Laminaria-Corallina oil project to be producing by the end of this year, its corporate affairs manager, Geoff Wedgwood, said.

At least seven other finds have been made.

The foreign ministers of Indonesia and Australia have agreed that at least some aspects of the treaty will have to be renegotiated if East Timor becomes independent.

Jailed resistance leader Jose Alexandre Gusmao and Nobel Peace Prize laureate Jose Ramos Horta, expected to be key players in any new East Timorese government, want East Timor to replace Indonesia as signatory to the treaty.

``If East Timor becomes independent, Indonesia ceases to be the other signatory. Timor would have to be signatory, without changing the content of the treaty,'' Ramos Horta said earlier this year.

Analysts say it might be years before royalties are enough to contribute significantly to the economy of an independent East Timor.

``The Timor Gap treaty will have no impact for probably a decade,'' said Scott Burchill, senior lecturer in international relations at Deakin University. ``But it will play a major role in East Timor's economic development when it comes on stream.''

The oil companies are most interested in stability and continuity.

``The issue of independence for East Timor is a matter of international law and resolution between governments,'' said Wedgwood. ``But if there is no logical and consistent regime in place, people will be reluctant to spend large amounts of money in the region.''

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