East Timor: Expansion of the Energy Sector under Discussion

The past months in East Timor have revealed serious tensions between Timorese leaders, Australia, and Woodside, the multinational company hoping to profit from new petroleum resources in Timorese territory.

Don Voelte, the CEO of Woodside Petroleum, visited Dili last month, and was not warmly received by the Timorese government including Prime Minister Xanana Gusmão. President Ramos Horta broke ranks from the Government and at least met with Voelte.

At issue is how to develop new petroleum resources in the Timor Sea south of the country.

East Timor was accruing revenue from taxes on oil exploitation in the Timor Sea south of its territory even before its formally recognized independence in 2002. The total tax revenue from this oil reserve is estimated to top out around $8 billion during the life of the oil reserve (discussed here).

Flickr User United Nations Photo, CC

But there is a potentially huge reserve of natural gas nearby in the Greater Sunrise field, and with increasing global demand for liquified natural gas (LNG), East Timor is hoping for a massive second windfall from the Timor Sea.

Timorese NGO La'o Hamutuk cites on its new blog Woodside's 2009 Annual Report in relation to the LNG

The Sunrise LNG Project involves the development of the Sunrise and Troubadour gas fields, collectively known as Greater Sunrise, located offshore, approximately 450 km north-west of Darwin, Northern Territory. […] The Governments of Timor–Leste and Australia will receive an equal share (50% each) of government upstream revenues from the development of the Greater Sunrise fields. This revenue will deliver long-term, stable and significant cash flow to Timor-Leste and Australia over approximately 30 years.

The Timorese Prime Minister Xanana Gusmão has implied that the future of Greater Sunrise is more than about business, that it is particularly historically significant, referring to the agreements between Australia and Indonesia during the forced occupation of the country that lasted for 24 years. Timorese news outlet Tempo Semanal recently described Gusmão reminding an audience in Dili [Tet]

Ho lampu verde xanana hatudu ba mapa area konjunta Timor leste ho Australia nia dehan, “iha ne’e area ida ne’ebe ita esplora hamutuk. Iha 1989, bainhira bapa sira sei kaer ita, dadur ita, oho ita, Ali Alatas ho Garreth Evans, Menlu Indonesia ho Australia sa’e aviaun ida, iha loos klaran ne’e, hemu tiha sampainia, fui ba ita nia ran leten hodi asina lima puluh persen ba Australia. Tan ba Australia rekonese integrasaun no lima puluh persen ba Indonesia tan nia simu integrasaun.”

Eis lider maximu da rezistensia iha luta ba libertasaun nasional Timor Leste ne’e reitera ho hatudu lampu verde ba area konjunta hodi dale, “Loloos ida ne’e hotu ita nian.”

With a green light, Xanana showed the joint area between Timor and Australia, saying “here is the area we will exploit together. In 1989, when the Indonesians were capturing us, imprisoning us, killing us, Ali Alatas and Gareth Evans, the Foreign Ministers from Indonesia and Australia got in a plane, and right over the middle here, they drank champagne, on top of our blood, to sign 50 percent for Australia. Because Australia recognized “integration” they got 50 percent from Indonesia.

The former leader of the resistance during the struggle for national liberation of Timor Leste reiterated, showing the area with a green light, “In truth this is all ours.”

Cartoon by Gus Leonisky from Your Democracy

The issue of the future pipeline and processing plant for the LNG has been the largest stumbling block between Australia and East Timor, and Woodside, the company with the largest share in the project. Under the Timor Sea Treaty, the development of the Greater Sunrise field is to be determined by the two countries. In late April, Woodside and partners announced their finding, that only two options were commercially viable, a floating processing plant or a pipeline to Australia, essentially rejecting a pipeline to East Timor's south coast.

East Timorese from all parties have pushed for an LNG pipeline and processing in East Timor, which they hope would generate jobs and economic development. Yet some take a more pragmatic approach, recognizing the complexity of the negotiation.

Another Timorese NGO Luta Hamutuk wrote in March [Tet], after having their loyalties questioned by the government,

Bainhira Luta Hamutuk halo vizita ba iha Viqueque, lideransa komunitariu nomos povu barak husu kona-ba posibilidade kadoras ba iha neba, tamba ofisiais guverno dala barak promete buat oi-oin iha neba nune to’o agora povu hein hela ho laran metin hodi simu kadoras. Problema lolos ne’e iha nebe? Bainhira guverno tun ba baze hateten tun-sae kona-ba kadoras atu mai ona; maibe realidade hatudu momos katak iha tensaun antre guverno Timor Leste ho Woodside nebe agora buat hotu sai la-klaru tiha.

When Luta Hamutuk visited Viqueque [District], community leaders and many people asked about the possibility of a pipeline to Viqueque, because many times government officials keep promising things there but until now people are still waiting resolutely to receive the pipeline. What exactly is the problem? The government visits the grassroots talking up the pipeline like it is already coming; but reality shows that there is tension between Timor Leste and Woodside such that things are still not yet clear.

Loron Económico, the only blog dedicated to economic analysis on Timor, discusses the emphasis on the “rapid expansion of the oil and gas sector” in the draft Strategic Development Plan currently being promoted by Gusmão. Blogger Lino Freitas writes [pt]

Quanto àquele pressuposto, ele parece ser de tal maneira forte e central a todo o Plano que qualquer “desaire” neste domínio — por exemplo, a não concretização a curto-médio prazo da instalação da fábrica de liquefacção do gás natural na costa sul do país — pode deitar por terra todo o “castelo” construído sobre essa base.

In relation to this assumption [the rapid expansion of the oil and gas sector], it appears to be so strong and central to the whole Plan that any kind of “snub” in this area — for example, the failure in the short to medium term to build a liquefied natural gas facility on the south coast of the country — could knock down to Earth the whole castle constructed on this foundation.

Yet freelance journalist and blogger Matt Crook observed earlier this month

The government of Timor-Leste continues to launch daggers at all things Woodside over development of Greater Sunrise. […] The government is obviously in no rush to go ahead with Greater Sunrise.

La'o Hamutuk blogged in late April when Woodside announced it would choose a floating LNG plant

La'o Hamutuk, as a Timorese organization which has followed this issue for many years, hopes that [the Greater Sunrise] project will give maximum benefit to the Timorese people. We are concerned that many commentators misrepresent the reality of the situation, which has economic, legal, technical and environmental aspects, not only politics.

This post was the second in a series of two on Timor's natural resource wealth. The first post looked at the issue of Timor's Petroleum Fund and budget allocations from oil revenue.


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