Published by ASIET
[ASIET established Indonesia - East Timor Campaign Watch in early 2000, and has published findings every 4 months since then. - BD]
Some of the most lucrative oil and gas reserves off the Australian coast can be found in the Timor Sea, especially in the Gap. Combined with the reserves of the North West Shelf, this area has attracted a large amount of investment from some of Australia’s and the world’s largest petro-chemical companies.
The Australian oil and gas lobby, through its considerable political power and influence, played a critical role during the negotiations of the Timor Gap Treaty in the ’70s and ‘80s. Industry representatives regularly accompanied ministerial delegations to Jakarta and had significant input into discussions on the Timor Gap.
Australia’s largest mining and exploration companies helped shape the final treaty and gave their full support to successive Liberal and Labor governments’ policy of recognising Indonesian sovereignty over East Timor.
Estimates on the amount of wealth expected to be created from oil and gas in the Timor Gap vary considerably. Many factors play a role in determining this, such as the fluctuation in the world price of oil and gas, the impact of domestic and international demand and the costs associated with production.
Taking these variables into account, it can be reasonably expected that the revenue return for exploration companies will be in excess of $20 billion over a 25-30 year period. In terms of royalties for East Timor, this would translate to around $5 billion, possibly more, depending on the outcome of the treaty negotiations
"Oil industry sources have advised that the proportion of cumulative undiscounted cash flow arising from Zone A over the 25-30 year production period (1998-2026) to be potentially claimed by an autonomous or independent East Timor would be in the order of US$2.2 billion, which is half the Joint Authority Share and half the corporate tax revenue.
"This figure is based on production of the proven and probable reserves of 30 million barrels of oil, 175 million barrels of liquid natural gas (LPG), 230 million barrels of condensate and 3.4 trillion cubic feet of natural gas sold as LNG. Total undiscounted gross sales revenue over the life of the fields is estimated to be in the order of US$11 billion.’’ (Excerpt from a posting on the reg.easttimor internet conference by oil industry analyst Geoff McKee, January 1999.)
"Phillips estimates that the Bayu-Undan oil field will produce 400 million barrels of crude and 3.4 trillion cubic feet of natural gas annually. The royalties and taxes are expected to reach $300 million a year. That’s six times East Timor’s current budget and enough says Sarah Cliffe, World Bank chief of mission in Dili, to fuel an annual economic growth rate of 15% for nine years’’. (Business Week, October 30, 2000)
"These resources are enormously important to East Timor. By the end of the decade it could mean between $US100-200 million for East Timor depending on how these negotiations turn out and for a country whose annual budget is just $US45 million that makes all the difference ... The resources of the Timor Sea could make the difference between having to choose between children’s health and chidren’s education to being able to do both.’’(Peter Galbraith, member for political affairs of the East Timor transitional cabinet, in an interview on ABC radio Asia Pacific program.)
Companies in the Timor Sea
Since the 1970s, a range of companies have been granted exploratory rights in the Timor Gap including: Timor Oil, Aquataine–Elf, Oceanic Exploration Company, BHP, Indonesia Petroleum, Santos, Chevron Corporation, Shell, British Petroleum Company, Woodside, Boral, Crusader, Petroz, Enterprise Oil, Korea Petroleum, Marathon Oil Company, Bridge Oil, Hardy Petroleum, Oryx Energy, Osaka Gas, West Oil, Emet and Nippon Oil (nearly all in Area A of the zone of cooperation).
The main companies operating in the Timor Gap are Phillips Petroleum, Shell, Santos, Woodside, Petroz, Kerr McGee Corpoartion, Inpex and British Borneo (a wholly-owned subsidiary of Eni, the giant Italian energy company).
Phillips, the major shareholder in the Bayu-Undan and Elang / Kakatua projects, is one of the largest petro-chemical companies in the US with some $US22 billion in assets. In 1999 it generated around $US14 billion in revenues from its world-wide operations. Phillips reportedly bought out BHP’s interests in the Timor Gap in April 1999 for between $200-$320 million.
Phillips has teamed up with Australia’s largest pipeline specialists, Epic Energy (who own $3.5billion worth of pipeline assets mostly in Western Australia) to work out the feasibility for the supply of Timor Gap gas for the domestic market .
Woodside, a Perth-based company, has had a long association with the Timor Gap. As a consequence of the sale of oil from the Laminaria/Corallina field, Woodside experienced a consolidated profit, after income tax, of $436.5 million for the first half of 2000. Along with Shell, Woodside has teamed-up with US-based Duke Energy (the tenth largest energy company in the world) to conduct their own feasibility study on the supply of gas to the domestic market.
Santos is Australia’s largest onshore oil and gas exploration company. As with Woodside, Santos posted record profits in the first half of 2000 — some $207 million, an increase of 147.6 %. In part this return was derived from its stake in the Elang oil field.
Petroz, a Brisbane-based company, while smaller compared to others operating in Area A, holds significant stakes in the Timor Gap. It has a 13.37% share in Bayu-Undan.
While BHP sold all of its interests in the Timor Gap to Phillips, it still has considerable investments in fields located just outside the western boundary of Area A — a 25% share in the lucrative Laminaria/Corallina (the other partners are Woodside 50% and Shell 25%) and a 50% share in the smaller Buffalo oil field.
In the event of the maritime boundary between Australia and East Timor being redrawn along international law, it is possible that a portion of these fields would come under the sovereignty of East Timor (or even be contested for by Indonesia).
Similarly, along the eastern boundary, a larger share of the massive Greater Sunrise/Troubadour gas field (jointly administered by Shell and Woodside through the Northern Australian Gas Venture) could come under the jurisdiction of East Timor.
At present East Timor has jurisdiction over just 20% of these fields.
BD: TIMOR OIL - A collection of recent reports, position statements, petitions, articles and news