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BACK DOOR Newsletter on East Timor

Timor Oil - In-depth Analysis
Analisis yang mendalam tentang isu-isu minyak Timor
Lia hakerek Matenek kona ba Timor nia Mina
O Petróleo de Timor: o informação

updated: 23 Sep 2005 
Return to Main Contents: BD: The 2004 TIMOR OIL Collection

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Daftar isi / Contents:

Bahasa  diperbarui: 23/9/2005
La'o Hamutuk, Institut Pemantau dan Analisis Rekonstruksi Timor Lorosa’e

English  updated: 23 Sep 2005
* Geoff McKee, Oil and Gas Engineer  added: Apl 11, 2005
* La’o Hamutuk, East Timor Institute for Reconstruction Monitoring and Analysis  updated: 23 Sep 2005
* Mary MacKillop Institute for East Timorese Studies

(Lia inglés / Bahasa Ingerris / English language)

In-depth Analysis

Geoff McKee, Oil and Gas Engineer

26 Mar 2005 McKee: How much is Sunrise really worth?:
A revised potential revenue estimate for a disputed gas resource in the Timor Sea
Analysis added 11 Apr 05
"Geoff's analysis shows that, because crude oil prices have climbed dramatically since 2002, the potential government revenue arising from a Sunrise gas project is about four times higher than the figures used by the oil companies and others. Geoff’s conclusions are vital as they enable communities in East Timor, Australia and elsewhere to appraise the actual value of the Sunrise gas resource. Because Geoff clearly states his assumptions, these can be used by ordinary people to evaluate the fairness or otherwise of the Australian government’s offers to East Timor." Editor, Back Door Newsletter

La’o Hamutuk, East Timor Institute for Reconstruction Monitoring and Analysis

NEW La'o Hamutuk Index to Articles about Oil and Gas:

La'o Hamutuk Bulletins - Timor's Oil: 

September 2004 The Case for Saving Sunrise
March 2004 East Timor Government's Budget Deficit
March 2004 Avoiding the Resource Curse
August 2003 Timor Sea Oil & Gas update

December 2002 Timor Oil Chronology
August 2002 Petroleum Conference in Darwin
July 2002: Timor Oil / International Solidarity

September 2004 The Case for Saving Sunrise:
"[oil and gas] Stakeholders, including oil companies, the Australian government, international financial institutions and aid agencies, are telling Timor-Leste what it should do, in light of their respective interests. The most important stakeholder – the people of Timor-Leste – would be best served by sequential, rather than simultaneous, development of Timor-Leste’s two major petroleum fields, postponing Sunrise development for at least a decade. This would allow time to make wiser decisions, and would help Timor-Leste maximize its petroleum revenues. Although neither Australia nor the oil companies currently prefer this path, Timor-Leste’s government is responsible for the long-term well-being of its own citizens, and that should be the primary consideration. This paper presents the reasons for developing Greater Sunrise after Bayu-Undan, saving Sunrise gas in the ground for 10-15 years, to maximize benefits for Timor-Leste." Submitted to the government of Timor-Leste by Charles Scheiner, La’o Hamutuk 28 July 2004

March 2004 East Timor Government's Budget Deficit:

March 2004 Seven Ways to Meet East Timor's Financial Gap
" ... the real reason for the budget shortfall is that East Timor has been prevented from receiving revenues from the Laminaria-Corallina oil field, which belongs to East Timor under the United Nations Convention on the Law of the Sea principles. Australia has taken in more than $1 billion in revenues from Laminaria-Corallina, enough to cover the budget shortfall eight times over." La’o Hamutuk

March 2004 Australia's Distortions:
"Australia’s declaration in March 2002 excluding the settlement of maritime boundaries from compulsory dispute resolution by the International Court of Justice and the International Tribunal for the Law of the Sea, reflects our strong view that any maritime boundary dispute is best settled by negotiation rather than litigation. This is precisely the course of action that Australia has now committed to in its discussions with East Timor on a permanent maritime boundary." Traci Williams, Third Secretary, Australian High Commission, London
Reply: "The rule of law, including impartial international legal mechanisms for resolving boundary disputes, exists to protect the small and weak from the predations of the rich and powerful, as well as to support the entire community of states. By closing legal avenues of appeal to East Timor, Australia hopes that “negotiations” between unequal parties will follow the law of the jungle, or will drag on for decades until Australia has harvested all the petroleum in disputed territory." La’o Hamutuk

March 2004 Maritime Boundaries Slow in Coming:
"Just before the November talks, more than 100 organizations from 19 countries wrote to Australian Prime Minister John Howard, urging his government to set a firm timetable for establishing a permanent maritime boundary within three years, and to treat East Timor “fairly and as a sovereign nation, with the same rights as Australia.” The Australian government replied that “the process [of delimiting maritime boundaries] is long and complex. Based on this experience, the Australian Government does not think it sensible to set an end-date for the process.” Australia also “has no plans to revisit its decision in March 2002 to no longer accept the jurisdiction of the International Court of Justice and other dispute settlement mechanisms…”  Many Australian people feel otherwise, and have launched a Timor Sea Justice Campaign, initially in Melbourne." La’o Hamutuk

March 2004 Avoiding the Resource Curse:
"Timor Leste has some features which could reduce the oil curse risk:
* Because Timor Leste is just starting to exploit its petroleum resources, we can learn from failures and successes in other countries. ...
* Timor Leste is fortunate that most of our petroleum is natural gas, since its price and market mechanisms are less unpredictable than oil. ...
* The people of Timor Leste are fiercely committed to this country’s independence, and will continue to struggle for its sovereignty and rights, and to demand that their government serves the people’s interest. Perhaps more than any other factor, this may help keep the government in line. In addition, Timor Leste’s small size and effective rumor communications infrastructure make it harder for illegal activities or corruption to be conducted without exposure. ...
* Finally, the use of the United States dollar as Timor Leste’s currency frees the country from having to worry about inflation or foreign exchange problems caused by oil money." Charles Scheiner, La’o Hamutuk

August 2003 Timor Sea Oil & Gas update:

August 2003 Timor Sea Historical Background:
"East Timor's economic independence depends on the money the new nation can earn by selling its natural resources, especially the petroleum deposits which lie under the Timor Sea between East Timor and Australia. These fields, which contain oil and gas worth more than US$30 billion, lie closer to East Timor's south coast than to any other land. However, due to a history of colonialism, invasion, occupation, and illegal activities by Indonesia and Australia, East Timor could receive less than half of the revenues it should be entitled to under the principles of the United Nations Convention on the Law of the Sea (UNCLOS)." La’o Hamutuk

August 2003 Boundaries and Petroleum Fields:
"Figures are taken from several sources; they approximate the situation at the end of 2002. The table shows that 32% of the petroleum resources in the Timor Sea are on Australia's side of the median line, while 68% are on East Timor's side. If we look at East Timor's rightful 68% share, we can see that:
* Under the Timor Sea Treaty, East Timor gives Australia 10% of the JPDA (excluding Sunrise), or 3% of East Timor's total Timor Sea resource share.
* Under the International Unitization Agreement, East Timor gives Australia 82% of Greater Sunrise, amounting to 48% of East Timor's total resources.
* By refusing to negotiate a boundary, Australia is taking an additional 8% of East Timor's petroleum, west of the JPDA but which would belong to East Timor under a median line boundary.
* Together, the two agreements transfer nearly two billion BOE from East Timor to Australia, resulting in East Timor's losing approximately 59% of its petroleum reserves. Although not shown in the table, Australia has more than four times as much as the total Timor Sea petroleum reserves in other areas." La’o Hamutuk

August 2003 Australia Blackmails East Timor:
"Last night the (Australian) Prime Minister used blackmail on East Timor. . . . The motive of the Prime Minister last night was to coerce East Timor, in terms of resources and money, through a threat to withdraw this legislation if the East Timorese government did not agree to sign the agreement today. ... We are debating today a piece of legislation that will involve, according to the Minister for Foreign Affairs, Mr. Downer, a $50 billion (U.S. $33 billion) break for Australia from the development of the oil and gas fields which are wholly within East Timorese waters, according to my interpretation and the interpretations of a number of international jurists. ... This is Australia being involved in a grand theft of the resources of our small neighbour East Timor -- the most impoverished neighbour in the neighbourhood having its one resource that is going to help it get up off the ground in the future taken by its richest neighbour. ... This is Prime Minister Howard, on behalf of the oil corporations, ringing the Prime Minister of East Timor, Dr Alkatiri, and saying to Dr Alkatiri, according to the Age report, 'If you do not sign the agreement for the development of the Greater Sunrise field' -- which is the biggest field and which is East Timorese -- 'and give that resource in the major part to Australia, then we won't have this legislation go through the Senate today,' which allows for the development of the other, smaller oilfield, which the East Timorese want to see developed." Green Party Senator Bob Brown, during the debate on ratification in the Australian Senate

August 2003 Sunrise Unitization Agreement Signed:
"The Greater Sunrise gas field, ... lies ... entirely on East Timor's side of the median line between East Timor and Australia. It contains nearly twice as much petroleum as Bayu-Undan, approximately $30 billion dollars worth. ... If a permanent maritime boundary is eventually agreed to, the Timor Sea Treaty becomes obsolete, and both countries will "reconsider" the Sunrise IUA, although the oil companies' contracts will not change, except for how their payments are allocated to each country. If no boundary settlement is reached, the IUA remains in effect forever and the Timor Sea Treaty lasts for 30 years, by which time most Timor Sea petroleum will have been exhausted. ... Before the Sunrise Unitization Agreement takes effect, it must be ratified by both countries. ... East Timor ... is in no hurry to ratify the agreement. The Dili Government ... could postpone this process to encourage Australia to discuss maritime boundaries. Even after the agreement is ratified, East Timor can still use its majority control of the Designated Authority which governs the JPDA, to prevent Sunrise development. Bayu-Undan will provide sufficient revenue for East Timor from 2006 for two decades, and East Timor does not need Sunrise income while Bayu-Undan is in full production." La’o Hamutuk

August 2003 Australia Stonewalls on Boundaries:
"East Timor, as a new sovereign country, is entitled to have its boundaries in the land, sea and air. The nation began to define its boundaries by enacting a Maritime Boundaries Law in October 2002. Since East Timor inherited no national maritime boundaries, it needs to agree on clear, permanent boundaries with its neighbors, Australia and Indonesia. Each country should resolve this boundary through negotiations and internationally-accepted legal mechanisms. ... Since East Timor's independence, Australia's government has refused to discuss the maritime boundary. In fact, Australia has been unfriendly, blackmailing East Timor on the Timor Sea Treaty. In March 2002, before the Timor Sea Treaty was signed, Australia withdrew from the mechanisms of the International Court of Justice (ICJ) and the UNCLOS Tribunal for impartial arbitration of maritime boundaries. This may have made it impossible for East Timor to use international law to resolve the dispute if negotiations fail. ... Australia's current policies continue the colonial doctrine of terra nullius ("empty land") used by Europeans to justify settling Australia two hundred years ago, seizing land and resources from indigenous people who had lived there for millennia by pretending they were not human or did not exist." La’o Hamutuk

August 2003 Glossary of Timor Oil & Gas Terms Used:
BD: "This glossary is invaluable for helping the reader through the maze of acronyms. eg. BOE, EEZ, FTP, ICJ, JPDA, LNG, NGL, PSC, TSDA, UNCLOS, ZOC"

December 2002 Timor Oil Chronology:
"27 Jan 1999: Indonesian president BJ Habibie accepts East Timorese demands for an internationally-supervised referendum on independence. Eight months of TNI/militia terror and devastation ensue.
30 Aug 1999: East Timor's people vote overwhelmingly to reject integration with Indonesia. Following massive destruction by departing Indonesian troops, the territory comes under a United Nations transitional administration leading to independence in May 2002. ...
Nov 1999: Woodside's Laminaria-Corallina project (which includes BHP and Shell) begins producing oil. The companies extract more than 100 million barrels, about half the total reserve, during the next two years, generating more than US$900 million for the Australian government. Some or all this revenue should be East Timor's if its Exclusive Economic Zone (EEZ) were drawn under UN Law of the Sea (UNCLOS) principles.
29 Nov 1999: Mari Alkatiri, East Timorese spokesman on the Timor Gap, says "we still consider the Timor Gap Treaty an illegal treaty. This is a point of principle. We are not going to be successor to an illegal treaty." " La’o Hamutuk

August 2002 Petroleum Conference in Darwin:
"The Timor Sea is an arena of strategic struggles using political and economic strength to promote different interests. For the Australian government, the Timor Sea is an opportunity that must be pursued using all political, economic and technological strength available. ... For East Timor, the substance of the Timor Gap issue is the recognition of its independence and national sovereignty by the international community, particularly by its two neighbors, Australia and Indonesia. Independence means that East Timor owns its national wealth, and has the right to explore and maintain that wealth in accordance with national and international legal principles. National sovereignty means that East Timor has territorial rights over land, water and air in accordance with national and international laws. As a small and poor nation, East Timor must rely on moral strength, including international solidarity, to balance the advantages of its powerful neighbor Australia. East Timor must call on the international community to respect East Timor as an independent and sovereign nation with its own territorial rights based on international law." La’o Hamutuk

July 2002: Timor Oil, Solidarity:

July 2002 With Money, Oil Also Brings Problems:
"Petroleum corporations are often much more powerful than governments, especially when large companies like Phillips or Shell come into small countries like East Timor. The companies often determine the choice of the Ministers of Energy, dictate the governments’ environmental policies, and use the military to protect their investments. It is impossible for a small government, even a democracy, to get a fair deal from huge multinational oil companies. ... Although the companies claim they are environmentally and socially responsible, they often lie. ... Around the world, local indigenous, environmental and grassroots communities and activists are dealing with these same issues, and often the same companies. They have developed the Oilwatch Network to learn from each other’s experiences and strengthen each other’s campaigns. By using monitoring, advocacy, the courts, and public exposure of information, Oilwatch members have averted environmental disasters and forced oil companies to be more responsible to the people of the countries they work in. As East Timor enters the community of oil-producing nations, we can benefit from their expertise and experience. Just as the oil companies work globally to maximize their profits, people can cooperate globally to minimize the negative effects of oil company operations." La’o Hamutuk

July 2002 Four-Fifths of Australia’s Gas is Outside the Timor Sea:
"The oil and gas in the Timor Sea are the only significant petroleum resources available to East Timor, and East Timor’s future depends on these revenues. Australia, on the other hand, has four times as much gas in other parts of its territory, as shown on the map below. Circles show the location of Australia’s “Proven and Probable” (2P) reserves of natural gas, where gas underground or undersea could be extracted and sold." La’o Hamutuk

July 2002 Company Shares of Timor Sea Oil and Gas Fields:
"The money to be made from Timor Sea oil and gas has attracted many international petroleum companies to East Timor’s neighborhood. The graph above shows which ones have purchased rights to sell the oil and gas. Phillips Petroleum (USA), Royal Dutch Shell (Great Britain and the Netherlands) and Woodside Australian Energy have the largest shares, and they are operating the oil industry here [East Timor]." La’o Hamutuk

July 2002 Annual Revenues of Governments and Oil Companies:
"Multinational oil companies are huge and powerful institutions, larger than many governments. One way to evaluate their power is to look at the amount of money involved in their operations. The graph below shows how much money selected governments and oil companies received (revenues, sales and taxes) during 2001. For East Timor and the United Nations, the figures are from their proposed budgets for 2002. The United Nations number includes operations, administration, and peacekeeping everywhere in the world." La’o Hamutuk

July 2002 Timor Sea Oil Companies at a Glance:
"The following brief summaries of basic information and history describe the international oil companies with the largest involvement in oil and gas developments in the Timor Sea. [These are: Phillips Petroleum, Royal Dutch Shell, Woodside, Santos, Osaka, Inpex, Kerr-McGee, Eni, PetroTimor] ... 
* Money is given in millions of U.S. dollars, according to each company’s Annual Report for 2001. “Assets” is the amount invested in the company, “revenues” is how much they received in 2001, and “profits” is how much was paid to the shareholders (owners) of the company during 2001.
* Reserves are oil and gas still in the ground, estimated in millions of Barrels of Oil Equivalent (mmBOE), from annual reports and other sources. ...
* “Reserves in Timor Sea” shows the amount each company owns of both East Timorese and Australian parts of the Timor Sea oil and gas deposits.
* The “Timor Sea part of reserves” percentage is an estimate of what part of each company’s worldwide total gas and oil reserves is in the Timor Sea. It indicates approximately how important the Timor Sea is to the company’s future." La’o Hamutuk

July 2002 What do East Timorese Activists Want from International Solidarity?:
"On 23 May 2002, La’o Hamutuk sponsored a meeting with international solidarity activists and East Timorese community activists to discuss: “What does international solidarity mean for an independent East Timor?” At the meeting, all agreed that international solidarity is still critically important, but it will not be the same as it was in the past. A major goal of the meeting was for international solidarity members to listen to East Timorese activists describe their ideas about the new meaning of solidarity and the main issues that need attention.
Four main priority areas were identified for solidarity work:
* international justice and advocacy for an international tribunal,
* economic justice,
* social development, and
* the exploitation of oil and natural gas in the Timor Sea." La’o Hamutuk

About La’o Hamutuk:

Mary MacKillop Institute for East Timorese Studies
 - Resources of the Timor Sea:

25 Sep 2004 MMIETS: Long Term Consequences of Government Policy 
Paper added 28 Sep 2004

"Here is a paper I gave at Politics in the Pub on 17.09.04. With the Timor Sea talks underway between Australia and East Timor at the moment, it remains to be seen what outcome there will be.  I believe that regardless of what the East Timor Government accepts, there are issues of principle which Australians should require that our Government fulfil. 
These made up the terms of the recent petition:
1.  That a fair and equitable boundary be set.
2.  That Australia negotiates in good faith and in a timely fashion.
3.  That Australia returns to International arbitration.
4.  That Australia stops benefitting financially from areas under dispute.
(Please note that Australia has been receiving one million dollars a day from an area claimed by East Timor. This amounts to nearly 2 billion dollars, ten times the amount we have spent there in aid.)
Australian policy is that we benefit financially from areas which are under dispute, and that policy has brought us nearly $2 billion since 1999. In discussing consequences of this policy, it is both fair and proper to consider the effects of the distribution of wealth.  So whilst I argue that the ownership of the resources of the Timor Sea must be determined only on principles of accepted law and customary practice, I maintain that the dire need of the people of East Timor makes the application of justice a priority. East Timor has gained its political independence, but is not yet economically independent. It is one of the poorest nations in Asia."
Sr. Susan Connelly, Spokesperson on oil issues, Mary MacKillop Institute for East Timorese Studies (MMIETS)

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