Subject: East Timor Backs Gas Project But Warns On Treaty

East Timor backs gas project but warns on treaty

By Paul Tait

DARWIN, Nov 10 (Reuters) - East Timorese leaders have backed the A$1.4 billion (US$896 million) Bayu-Undan gas project, an important part of the broken territory's economic reconstruction, but warned on Wednesday key treaty areas must be renegotiated.

Project partner Petroz NL said operator Phillips Petroleum Co had received a letter signed by East Timorese leaders Xanana Gusmao, Jose Ramos-Horta and Mari Alkatiri saying they would honour Timor Gap petroleum zone arrangements.

``Yes, it was sent...but that doesn't mean we have already accepted the treaty as it is,'' Alkatiri told Reuters.

The Timor Gap treaty was signed by Australia and Indonesia in 1989. Indonesia invaded the territory in 1975 and East Timorese leaders regard Jakarta as an illegal signatory.

Alkatiri is a member of the seven-man East Timorese Transitional Council working with the United Nations, which is soon to take over full civil administration and peacekeeping in the battered territory after Indonesia withdrew last month.

He is also responsible for negotiations on the Timor Gap, which is divided into five administrative areas with varying degrees of responsibility between Australia and Indonesia and a ``Zone of Cooperation.''

REDEFINE BORDERS

While the Bayu-Undan gas and condensate project could proceed in the early stages, Alkatiri warned that maritime borders between East Timor and Australia would have to be renegotiated.

``It's not a problem of oil and gas, it's a problem of maritime borders, it's a problem between East Timor and Australia,'' he said. ``I think we have to redefine, renegotiate the border later on when East Timor becomes independent.''

The United Nations Transitional Administration in East Timor (UNTAET) expects to be in place for between two and three years.

Australia's Northern Territory Resource Development Minister Daryl Manzie said East Timor would succeed Indonesia as a treaty signatory and that UNTAET would be responsible for the treaty's administration until East Timor became fully independent.

``We've received a clear message from East Timor officials that the treaty will be honoured,'' Manzie told reporters.

Large parts of East Timor were destroyed in a wave of violence by vengeful pro-Indonesia militias in September after an August vote for independence.

The World Bank is leading an assessment mission to determine what East Timor needs for its massive task of rebuilding after the violence. East Timorese leaders have eyed natural resources like gas as potential export earners.

DISAGREEMENT OVER RESERVES

Alkatiri would not say how important the Bayu-Undan project would be to the fledgling East Timor economy because of disagreements over the level of gas reserves.

Petroz estimates there are probable reserves of 325 million barrels of condensate and LPG and gas reserves amounting to 3.4 trillion cubic feet.

``I would prefer not to talk about the importance of the project to East Timor itself because we have some contradictory information...there is still a big discrepancy,'' he said.

Production is expected to begin in late 2003 or early 2004.

Phillips' partners are Santos Ltd with 11.8 percent, Indonesian Inpex Sahul Ltd with 11.7 percent, Kerr-McGee Corp with 11.2 percent, Petroz with 8.3 percent, and British-Borneo Oil & Gas Plc with 6.7 percent. (A$1-US$0.64)


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