The U-S company PetroTimor says it was granted the mining concessions before Indonesia’s invasion of East Timor.
The company says it can lay a pipeline to Timor rather than Darwin, which would see Australia miss out on millions of dollars in royalties.
The U-N negotiator on the case says if the company’s proposal is possible, it would be a far better outcome for the East Timorese since it would provide them with infrastructure, employment and revenue.
Ambassador Peter Galbraith’s interview on ABC national television news last night may turn out to be more of a bombshell than his 9 April APPEA (Australian Petroleum Production & Exploration Association) address in Hobart, Tasmania. On that occasion, Galbraith and economics minister Dr. Mari Alkatiri reminded the Australian oil industry that if Australia did not recognise East Timor’s legitimate rights under international law, this could lead to a delay in project development. What followed was quite a reaction in the Australian media.
It is interesting to observe that the East Timorese now appear to be ‘raising the stakes’ in the negotiations, bringing up two controversial issues in one hit.
Firstly, Australia is reminded of the very shaky legal validity of all exploration permits issued under the now defunct Timor Gap Treaty. Entering this arena may be an outcome which all participants may really wish to avoid. Hopefully being reminded of the existence of this legal quagmire will act as a ‘deterrent’ and focus the minds of the Australian negotiators on how it can avoided.
Secondly, the debate over the technical
and economic feasibility of a pipeline to East Timor has been re-activated
by PetroTimor’s claim that they can construct such a pipeline.
It is known that the East Timorese leadership are aware of the benefits
of a small diameter pipeline - or alternative LNG or CNG transportation
scheme - to bring gas from Bayu-Undan to the East Timor domestic market.
This potential project would enable the small country to have a secure
and clean source of energy amounting to only about 7% of Bayu-Undan’s gas
reserves over a 30 year project life. The alternative is continuing
reliance on imported diesel, estimated consumption of which is in the order
of 5 million tonnes during the next 30 years, costing the country over
US$1.1 billion in hard currency. Natural gas could be considered
as a part of Timor Gap royalties, as ‘part payment-in-kind’.
A diesel based economy incurs other costs including environmental deficits
and lost opportunities for industrial development based on a cheap, secure
and clean energy source.
Phillips Petroleum effectively killed the pipeline debate 12 months ago when Mr. Jim Mulva, chief executive, made public statements to the effect that it is “impossible” to construct a pipeline across the Timor Trough (Dow Jones Newswires, 25 June 2000). Ten months earlier, on 8 September, 1999, Phillips Petroleum’s Mr Jim Godlove was asked at the Senate East Timor Enquiry to comment on the northern pipeline route from Bayu-Undan. He stated that such route is impossible because “the trench is too deep and too seismically active”. Mr Godlove mentioned that Phillips funded “a very significant engineering study” in order to come to these conclusions, and the study had been issued to the Joint Authority. Mr. Robert Mollah, Australian Executive Director of the Timor Gap Joint Authority stated to the undersigned on 20 July, 2000 that he “is not in a position to release such a study at this time”.
When the President of INTEC Engineering
of Houston, USA - one or the world leaders in offshore deepwater gas pipeline
technology - was asked to comment on the feasibility of crossing the Timor
Trough, he replied:
“Our deepwater pipeline experience indeed gives us the confidence that a pipeline in several thousand meter water depth is feasible even in rough terrain. We found acceptable routes for the Black Sea crossing and the Oman-India pipeline, both of which had severe shore approach problems. As far as seismic risks are concerned, we did a large amount of work on the Malampaya pipeline in the Philippines which crosses coral areas, active faults, slopes of underwater volcanoes and areas of potential turbidity flows”
José Ramos-Horta’s warnings were
not heeded when he wrote in1990 following the signing of the Timor Gap
“Australian oil companies would be well advised not to jump into the Timor Gap area. A future government of an independent East Timor would certainly review all oil exploration agreements in the area and will not be bound by any agreement signed by third parties. Australian oil companies that join in the violation of the Timorese maritime resources might see their licences revoked and the exploration and drilling rights transferred to American companies such as Oceanic Exploration of Denver, Colorado. A good advice to Australian business: wait and see how things develop in the next 5 to 10 years.” (in Sasha Stepan, Credibility Gap, ACFOA Development Dossier No.28, October 1990, Preface p.iv.)
Legal experts within the Australian oil
& gas industry have always been aware of the rights of fellow oil explorer
Oceanic Exploration of Denver, Colorado. The oil industry takes a very
dim view - with much justification - of governments which expropriate legitimately
acquired oil exploration rights . If Mr Jim Godlove was an employee
of Oceanic Exploration rather than Phillips Petroleum, his arguments for
the ‘enforceability of these rights would probably be unchanged.
Seven years ago, Mr Peter Reid, one of the Australian oil industry’s foremost
legal experts on northern maritime border issues, in an address to the
APPEA conference held in Sydney, dwelt at length on the legal status of
the Oceanic Exploration permit issued by Portugal and covering most of
what is now called ‘ZOCA’. “The status of this permit is unclear
even today” he then concluded (see APPEA Journal, 1994, Part 2, p188)
The Timor Gap Treaty, being a significant obstacle to East Timorese self determination, had to be treated with ‘kid gloves’ by the East Timorese side in the critical and politically sensitive 1998 / 1999 period. The ‘successor state’ approach was welcomed by Australian interests when it became clear that the East Timorese would achieve independence. However, now, faced with building a new nation state from a country ruined, circumstances are very different. It is hoped that East Timor’s negotiating strategy will be successful in bringing about a mutually agreed framework for project development. I am optimistic that a win-win outcome will eventually be achieved, although the problem seems to be how this can be bought about in a short time-frame so as not to delay existing project developments.
BD: TIMOR OIL - A collection of recent reports, position statements, petitions, articles and news