East Timor signs lucrative
Special report: Indonesia and East Timor
John Aglionby, south-east Asia correspondent
Friday July 6, 2001
East Timor was thrown a multi-billion pound economic lifeline yesterday when it signed an agreement with Australia on the division of oil and gas reserves in the Timor Sea, which separates the countries.
After 15 months of tough negotiations, it was agreed that East Timor would receive 90% of the royalties from the drilling, or £2.8bn to £3.5bn in the 20 years from 2004.
In addition to its 10% share of the upstream royalties, Australia is likely to make four to five times that figure from refining the oil and gas, as East Timor is not expected to build the facilities to do so.
The deal was initialled in the East Timor capital, Dili, yesterday by the Australian foreign minister, Alexander Downer, the economics minister for East Timor, Mari Alkairi, and Peter Galbraith of the UN, the former Portuguese colony’s political affairs minister.
The administration of East Timor is in the hands of the UN during its transition to full independence from Indonesia, expected early next year. The treaty must be formally approved by the country’s first government.
“Ninety percent is great,” Mr Galbraith
said. “I think it’s the best deal we could have gotten. Obviously, I think
we were entitled to 100% of the upstream [royalties], but to get that would
have meant going to court and, with the time delay, we would have lost
Australia was granted a 50-50 split when East Timor was under Indonesian rule, partly, it is thought, in return for recognising Indonesian sovereignty over the territory, which lasted for 25 years until 1999.
The Australians initially wanted to maintain that ratio, but soon realised that their claim had little legitimacy.
Mr Downer was effusive as he toasted the treaty with champagne. “I am convinced that the Timor Sea Arrangement is a good outcome for Australia and East Timor,” he said.
“This is an outcome that will provide... East Timor the opportunity to build itself into a truly successful nation.”
Before the deal was struck, East Timor’s annual budget was less than £43m, with coffee, at £14m, the largest revenue earner.
Mr Galbraith agreed that it was going to make a huge difference to the lives of the 750,000 East Timorese.
“Fundamentally, this means the difference between being mired in poverty and dependent on foreign aid,” he said, “and being able to make progress.”
BD: TIMOR OIL - A collection of recent reports, position statements, petitions, articles and news