EDITORIAL: by Peter WestmoreNews Weekly
Australia and the Timor Gap Treaty
, August 14, 2004
Further development of the rich Greater Sunrise gas field in the Timor Sea, between Australia and East Timor, is at risk due to a disagreement between Australian and East Timorese negotiators, over the Timor Gap Treaty, which distributes access and royalties to the seabed off Australia's north-west coast.
Delicate negotiations have been fouled by Labor leader, Mark Latham, who in an off-the-cuff interview late in July, suggested that a future Labor Government would renegotiate the whole agreement in East Timor's favour, thereby ensuring that there will be no constructive negotiations until after the next election.
East Timor's leaders have taken the line that the existing treaty, originally signed with Indonesia in 1989, is unfair to East Timor. Its Prime Minister Mari Alkatiri and Foreign Minister, José Ramos Horta, said that Australia is breaching international law by taking billions of dollars worth of oil and gas from the Timor Gap fields, which East Timor says it owns.
As this issue threatens the future development of a very important natural resource, as well as Australia's relations with a near neighbour, it is important to give some background.Background
The discovery of natural gas and oil on the north-west Shelf, off Western Australia, goes back over 30 years. In 1971-2, significant gas and condensate discoveries were made in the North Rankin, Goodwyn and Angel fields, in deep water more than 130 kilometres off the WA coast in the Timor Sea.
These discoveries were followed by others, further out into the Timor Sea.
In 1985, Japanese electricity and gas utilities signed contracts for the supply of liquefied natural gas from the region.
In the meantime, negotiations had begun with Indonesia, to encourage exploration and development of petroleum resources in the area. In 1989, the Hawke Labor Government signed the Timor Gap Treaty which drew the line between Australia and what was then Indonesian Timor at the deepest point on the sea bed, which is relatively close to East Timor.
Infrastructure costing several billion dollars has since been built on the Burrup Peninsula, in North-Western WA, to process the gas for export. In recent years, the Greater Sunrise field - discovered in the late 1970s and the largest gas field in the area - is scheduled for development
On the basis of this agreement, massive development of the north-west shelf has proceeded, culminating in a contract, signed in 2002, for the annual delivery of 3 million tonnes of liquefied natural gas to the Chinese province of Guangdong, over a 20-year period. The contract is worth $25 billion.
Under the terms of the Timor Gap Treaty, this is located across the boundary of the Australian area and is an area of joint administration.
After the East Timorese voted for independence from Indonesia in 1999, negotiations commenced with the interim Government regarding the future of the Timor Gap Treaty.
In May 2002, within a day of East Timor's independence, Australia signed a new Timor Gap Treaty which was designed to give certainty to exploration companies involved in the area.
The terms of the new agreement were more generous to East Timor than had previously been negotiated with Indonesia, giving 90 per cent of revenue in the jointly administered area to East Timor, and 10 per cent to Australia.
However, the East Timorese Government wanted more. It wanted to redraw the boundary mid-way between Australia and East Timor, in a location which would effectively put the entire Greater Sunrise field, and others in the area, entirely within East Timor's area.
Negotiations have been conducted over the past two years, but without agreement. The companies developing Greater Sunrise have indicated that they cannot proceed with development without firm legal boundaries between Australia and East Timor.
As Christopher Pearson has pointed out, "East Timor has made an ambit claim to change them, so as to swell its share of prospective royalties ... It would also, willy-nilly, involve the Indonesians in renegotiating their maritime boundaries with Australia and could jeopardise 6000 nautical miles of agreed borders." (The Australian
, July 31, 2004)
For all these reasons, it is inconceivable that Australia - under Mr Howard or Mr Latham - could agree. Where that leaves things is that with no settlement, the development of the Greater Sunrise field will come to a standstill, jeopardising not only Australia's exports of oil and gas, but ultimately East Timor's economic future, which depends on a fair negotiated share of the royalties.
It may be that the East Timorese Prime Minister, Mari Alkatiri, under fire in East Timor for corruption and maladministration, will use this issue to distract attention for his own government's failures. Neither he nor Mr Latham should be able to get away with it.
- Peter Westmore is President of the National Civic Council.