Regional LNG: Timor talk back minus LNG plant: Report

An agreement to share revenue from Timor Sea oil-gas developments is back on the agenda after East Timor finally delinked the location of the Greater Sunrise gas development from a formal revenue sharing treaty with Australia, The Australian reported Monday.

The decision is expected to speed up technical discussions on the deal that could be signed before the end the year.

East Timor Foreign Minister Jose Ramos Horta has confirmed the decision but maintains East Timor still wants to negotiate with Woodside, the Greater Sunrise operator, for the proposed LNG processing plant to be located in East Timor rather than Darwin.

The Australian Government has refused to intervene, saying the location of the plant, which is part of a project estimated to cost at least A$5 billion, is a commercial matter.

East Timor originally agreed to an 80:20 split on Greater Sunrise revenues - 80 per cent of the reservoir is in Australian waters - but subsequently decided against legislating that agreement as part of its campaign to secure a permanent maritime boundary for the two countries at roughly the mid-point between them.

Australia has insisted its maritime boundary extends to the edge of the continental shelf which in some places is only 80km from the East Timor coast.

United Nations estimates in 2001 suggested more than US$40 billion in oil and gas revenues could be denied East Timor if Australia went ahead.

In May, the countries agreed to postpone maritime boundary claims for around 40 to 50 years, after Australia promised to hand over between $11 billion and $13 billion in future Timor Sea revenues. This deal still has to be signed, after a tortuous process of establishing the exact meaning and consequences of each clause.

Another delay has been East Timor's desultory approach to discussions with Woodside on bringing Greater Sunrise onshore across the 3000m deep Timor Trough at the edge of the continental shelf.

Woodside, which froze work on the project late last year after the partners, which include ConocoPhillips, Shell and Osaka Gas, claimed $200 million had been spent in exploration and developments costs, says such a proposition is not commercially viable.

Horta, who met his Australian counterpart, Alexander Downer, in Canberra last week, said later that he now expected an agreement between the two countries could be signed by the end of the year.

He told Radio Australia that East Timor now accepted the revenue sharing agreement would not include reference to the location of Greater Sunrise processing facilities.

"We are in discussions with Woodside," Horta said. "It is is up to them to make a credible case that the gas should be shipped to Darwin rather than East Timor. The advice to me is that it makes more commercial sense to come to East Timor."

Woodside, which maintains it will not reactivate the Greater Sunrise project until it receives legal, fiscal and regulatory certainty from the East Timor Government, has previously revealed that its own studies make a strong case for Darwin rather than bridging the Timor Trough.(*)