During its original negotiations with Indonesia, the Australian government had insisted that the Australian maritime boundary be extended to the edge of the continental shelf rather than just to the median line between East Timor and Australia. That is, Australia claimed a maritime boundary well north of the median line and therefore closer to East Timor than to Australia. The Indonesian government wanted the median line to be the maritime boundary. As a compromise, the area or "gap" between the edge of the continental shelf and the median line was named Zone of Cooperation A (ZOCA), with income from the oil and gas therein being shared equally between Indonesia and Australia. It is in ZOCA that the most significant finds of gas and oil have thus far been made.
East Timorese authorities have for some time maintained that an independent East Timor would seek to review aspects of the Timor Gap Treaty. However they have also stressed that they do not want to do anything that upsets investors or potential aid donors.
Speaking at the National Press Club on 5 May, the CNRT Vice-President Jose Ramos- Horta hinted that the future East Timorese government would seek to re-negotiate the treaty. Then on 7 May, on ABC Radio, he stated "we are happy to continue to live with the terms of the agreement for the next year or two or three years. However at the same time we must begin negotiations to review some of the terms ... if you notice where the gas and oil findings are located, I would dare to say that up to 90 percent of the revenues from there could go to East Timor if we have a fair deal." (ABC Radio National, Background Briefing, 7 May 2000).
In mid-June, Marie Alkatiri, CNRT's economic planning chief, and Peter Galbraith, the political chief of the UN Transitional Administration in East Timor (UNTAET) opened discussions with the Australian Government to redraw the maritime boundary between East Timor and Australia, rather than to simply negotiate for a greater share in the proceeds under the treaty as it stands. "In a fundamental shift, the CNRT, effectively East Timor's government-in-waiting, is insisting that a new seabed boundary, drawn an equal distance between East Timor and Australia, is the starting point for negotiations on a new Timor Gap oil and gas revenue sharing deal" (Alford and Garran, The Australian, 14 June 2000)
This East Timorese demand that the boundary be moved south to the median line would, if successful, put ZOCA entirely within East Timorese waters. Australia would be left with Zone of Cooperation B (ZOCB). Zone of Cooperation C (ZOCC) would also be within the East Timorese maritime boundary.
The East Timorese and UNTAET have a strong argument in their favour. Since the treaty was signed, the UN Convention on the Law of the Sea has established that "the exclusive economic zone boundary between two states that are less than 400 nautical miles apart should be the mid-line between their coasts." (Sydney Morning Herald, 13 April 2000)
On 18 September 2000, the Australian government announced that negotiations with UNAET and East Timorese representatives would soon begin on the future arrangements for the exploration and exploitation of petroleum in the Timor Gap. While the treaty currently in operation would continue as long as East Timor remained under the stewardship of UNTAET, this agreement would expire on the date that East Timor becomes independent, and it was necessary to avoid a legal vacuum and provide commercial certainty during the transition to independence. (DFAT Media Release, 18 Sept 2000).
In the days immediately before the negotiations commenced, the chief UN negotiator, Peter Galbraith, maintained that "the East Timorese maritime boundary should be a median point about halfway between Australia and East Timor..." (Dodd, M., The Age, 9 Oct 2000, p.10)
The East Timorese did indicate some flexibility in their negotiating position. Alfredo Pires, energy adviser to CNRT, allowed that "the final amount of revenue sought by East Timor from the Zone of Cooperation could be offset by guarantees on training and employment opportunities for East Timorese" (The Age, 9 Oct 2000, p.10)
There is political pressure on Australia to be generous to East Timor. The Australian Democrats' Foreign Affairs Spokesperson, Vicki Bourne, called for 90 percent of the revenue from the Zone to go to East Timor as part of a new agreement as a "meaningful commitment to East Timor's economic viability." (ABC AustraliaOnline News 12 Oct 2000)
The first round of negotiations in early October lasted four days, and produced a surprising level of angst on the part of the Australian negotiators. The cause was not the potential loss of taxes from the product of ZOCA if the maritime boundary was redrawn. "At worst, Canberra will lose a couple of hundred million dollars ... this amount, small for Canberra, would be a saviour for East Timor's future government." (McDonald, H., The Age, 21 Oct 2000)
The real problem for the Australian government lies in the wider consequences of a redrawn boundary in the Timor Gap. A retreat to the median line there would put an absurd looking dog-leg in the seabed boundary along the Timor and Arafura Seas, opposite East Timor, that Indonesia would query. Indonesia might well seek to renegotiate the entire maritime boundary between Australia and Indonesia, using the renegotiated boundary between East Timor and Australia as a precedent. From the Australian point of view, this would endanger a much wider area of potential oil or gas reserves, of which the Timor Gap is only the centrepiece. This wider area is thought to contain approximately 15 trillion cubic feet of gas, about twice the reserves of the North West Shelf." (The Age, 21 Oct 2000)
The negotiations are continuing.