Australia, Timor-Leste soon to settle maritime boundary dispute

Australia, Timor-Leste soon to settle maritime boundary dispute

FORUM Staff

Australia and the tiny nation of Timor-Leste could be only weeks away from ending a years-long dispute over maritime boundaries and how to divide the rewards from vast undersea oil and natural gas reserves.

Dionisio Babo Soares, Timor-Leste’s foreign minister, told Reuters in late June 2019 that ratification of a maritime border treaty could take place on August 30, 2019, which is the anniversary of the Pacific nation’s independence from Indonesia in 1999.

Ratification could lead to the development of the Greater Sunrise natural gas field, an undersea reserve discovered in 1974. It is estimated to hold 5.1 trillion cubic feet of gas, Reuters reported.

“Ratification will be a victory for East Timor [Timor-Leste], for achieving not only national sovereignty but also maritime sovereignty,” Babo Soares said.

Ratification of the treaty also could provide a much-needed economic infusion for Timor-Leste, one of the poorest nations in the world. The Asian Development Bank reported that more than 40% of the nation’s population is living in poverty. The maritime boundaries were redrawn in 2018 to put 70% of the Greater Sunrise gas field in Timor-Leste’s waters.

The gas reserves will be jointly developed, with Timor-Leste receiving 70% of the revenue and Australia 30% if the gas is processed in Timor-Leste. If the processing plant is in Australia, Timor-Leste will receive 80% and Australia 20%, according to an analysis by Donald R. Rothwell, professor of international law at the Australian National University College of Law. The Greater Sunrise fields are about 150 kilometers southeast of Timor-Leste and 450 kilometers northwest of Darwin, Australia. (Pictured: The flags of Timor-Leste, left, and Australia are displayed during a ceremony at the United Nations in March 2018.)

Rothwell, in an article for the Australian Strategic Policy Institute, said reaching a revenue-sharing agreement was difficult in part because energy companies — Woodside Petroleum, Royal Dutch Shell, ConocoPhillips and Osaka Gas — had legal interests in the Greater Sunrise field and had to be accommodated.

Timor-Leste for decades has argued that a maritime border should sit halfway between it and Australia, which would place most of the Greater Sunrise field in Timor-Leste’s territory, according to the Australian Broadcasting Corp. Negotiations over boundaries started between Australia and Timor-Leste in 2004. A treaty signed in 2006 didn’t include a permanent border, but the pact said revenue from the Greater Sunrise oil and gas field would be split evenly.

The agreement reached in 2018 that is up for ratification, however, puts much of the undersea resources in Timor-Leste’s territory. That has created a flood of optimism.

TimorGap, the state oil company for Timor-Leste, recently bought out stakes in the project held by Royal Dutch Shell and ConocoPhillips for U.S. $650 million, giving the state oil company majority ownership of Greater Sunrise. The company is trying to line up a partner to build a liquified natural gas plant in Timor-Leste, Reuters reported.

“We believe there’s good opportunity in the market in 2025, 2026,” said Francisco Monteiro, chief executive of TimorGap. “As it stands now, we think progress towards an FID [final investment decision] in two, three years is reasonable.”

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