On the day Timor-Leste became a sovereign nation, the new government signed a deal with Australia. The 2002 Timor Sea Treaty resembled the earlier Indonesia-Australia treaty in place since 1989, with one fundamental difference.
Whereas the earlier arrangement ignored Timorese interests, under the new agreement 90 per cent of the earnings from the Joint Petroleum Development Area (JPDA) went to Timor-Leste, with the remaining ten per cent going to Australia.
‘It will give East Timor an opportunity to build itself into a truly successful nation,’ Foreign Minister Alexander Downer said at the time. While some international law commentators lauded the deal as a good compromise; others are more circumspect.
Geoffrey McKee, a chemical engineer with more than three decades of experience in the Australian oil and gas industry, is one of them. The treaty will deprive the Timorese of a ‘swathe of important benefits’ especially down-stream infrastructure development, he says.
The Timor Sea’s real prize was not the joint development area, otherwise known as Timor Gap, but oil and gas fields on its fringes: especially, the Greater Sunrise. In August 2002, a Shell spokesman told the Joint Standing Committee on Treaties that the Greater Sunrise expected to return $30 billion in export revenues, with approximately $8 billion in taxes for the two countries.
McKee says it could earn much more. ‘At that time the expected earnings were based on US$20 a barrel for crude, now it’s around US$50,’ he says. ‘The $3 billion offered to East Timor by Australia is far too low, if it is intended to settle a dispute over a gas field that could yield about $90 billion in export revenues.’
More on the $3 billion payment later, but let’s return to our starting point. One of the mysteries, among many, is why Timor-Leste signed the treaty with Australia three years ago. McKee suggests Timor-Leste was badly served byinexperienced negotiators. The country also needed an income.
A Commonwealth parliamentary library research note puts it this way: ‘Australia had refused to agree to a new seabed boundary, and new talks on a final agreement might have brought both immediate and future investment in exploration and production to a halt.’
At stake for the Timorese was $8 billion over two decades. ‘With the East Timor government having no other major source of revenue (except foreign aid),’ the note continues, ‘it was in no position to stand on a point of principle.’ Read the article here.
First published in Eureka Street, April 2006.