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East Timor News Digest 5 – May 1-31, 2010

8 years of independence

UNMIT/ISF Health & education Economy & investment Opinion & analysis

8 years of independence

Ramos-Horta says East Timor finds peace at last

Agence France Presse - May 20, 2010

Matt Crook, Dili – East Timorese President Jose Ramos-Horta said his young country had finally achieved peace and could look forward to prosperity as it celebrated eight years of independence from Indonesia on Thursday.

Thousands of people gathered along the capital's waterfront ahead of a flag-raising ceremony at the presidential palace which will kick off festivities culminating in the inaugural Dili Half Marathon on June 20.

Residents enjoyed traditional music and dancing, cockfights and carnival games in stark contrast to the massacres and bloody uprisings that benighted the seaside city before and after the painful birth of the nation.

Nobel laureate Ramos-Horta said the former Portuguese colony, which was annexed by Indonesia in 1975, had at last turned a page on its violent past.

"The situation in Timor-Leste remains very, very calm, peaceful," he told AFP, using the country's formal name.

"We do have (from) time to time sporadic incidents involving youth groups, but in terms of security and the definition of security, it is of minimal concern."

A UN-supervised referendum on August 30, 1999, saw almost 80 percent of East Timorese people vote in favour of independence, signalling the beginning of the end of the Indonesian military's brutal 24-year occupation.

At least 100,000 East Timorese lost their lives during the occupation, through fighting, disease and starvation.

The referendum triggered a spasm of bloodletting by Indonesian- backed militias which killed some 1,400 people and ended only after the arrival of an Australian-led military stabilisation force.

Formal independence came in 2002, but the mainly Catholic country of 1.1 million people was soon in violent turmoil again.

Festering internal rivalries erupted in 2006 with fighting between factions of the security forces that killed 37 people on the streets of Dili, displaced more than 150,000 and required the return of UN peacekeepers.

Then, in February 2008, rebels shot and almost killed Ramos-Horta outside his Dili home. The rebel leader was killed by the president's guards and his uprising fizzled.

Two years of relative calm have convinced many that the resource-rich country is finally on the road to peaceful prosperity, even if it remains dependent on foreign aid and wracked by poverty and unemployment.

Top UN economist Jeffrey Sachs, visiting Dili in March, predicted that East Timor would grow faster than China over the next decade if the government spent its treasure chest of oil and gas revenues wisely.

The UN mission is starting to hand over law-and-order responsibilities to local police, while New Zealand withdrew 75 troops – half its 140-strong contingent – on Wednesday.

"We have increasing confidence in Timor-Leste's journey towards permanent stability," New Zealand Defence Minister Wayne Mapp said Tuesday.

Despite the brighter outlook, some observers point to sustained tensions among disenfranchised youths, an ineffective judicial sector and the ill-equipped police force (PNTL) as causes for continuing concern.

The country's Ombudsman for Human Rights and Justice has received more than 1,000 complaints, many against the PNTL, of human rights violations.

The 3,000-strong PNTL has taken back six of 13 districts from UN police but some analysts fear unrest if the international community pulls out too soon.

UNMIT/ISF

East Timor deployment to be cut

New Zealand Press Association (NZPA) - May 18, 2010

New Zealand's military deployment in East Timor is being cut because the security situation there has improved, Defence Minister Wayne Mapp says.

The next rotation leaves tomorrow with 75 personnel, just over half the size of earlier rotations of around 140. "We have increasing confidence in Timor-Leste's journey towards permanent stability," Dr Mapp said today.

"The Australian-New Zealand International Stabilisation force is one of the main international security operations in Timor-Leste. Australia reduced its commitment by around 100 personnel in January last year. We can now follow suit."

Dr Mapp said considerable international security assistance was still needed, but the nature of that need was changing and fewer defence personnel were required.

The NZDF has been contributing a light infantry company to the International Stabilisation Force since May 2006, New Zealand's largest overseas deployment for most of the time since then.

"We have a very warm relationship with Timor-Leste, focused on providing security and development assistance and that will continue," Dr Mapp said. "They still need our support and they will have it."

Health & education

Improving Timor's language education

Radio Australia - May 7, 2010

East Timor's two official languages are Tetum and Portuguese, but at least sixteen languages are spoken there. English and Bahasa Indonesia are also recognised as important working languages especially if East Timor is to develop its economy. Improving education and literacy is obviously the key, but East Timor's learning system is failing to keep children at school, especially in the early years. East Timor's former first lady, Australian- born Kirsty Sword-Gusmao, is Co-Chair of the National Education Commission and the Goodwill Ambassador for Education.

Presenter: Sen Lam

Speakers: Kirsty Sword-Gusmao, Co-Chair National Education Commission, and Goodwill Ambassador for Education

Gusmao: Putting in place a system of nine years basic compulsory free education, implementing that is obviously somewhat of a challenge, but the fact that that has been set as a standard and as a goal is I think very important. There's been a lot done in the area of professional development of teachers, which is a huge priority in terms of being able to provide quality education to the entire nation. So yes, there have been some steps forward, but still a very long way to go. What specifically the National Education Commission is looking at the moment is basically working out a policy, a language and education policy which is drawing on not only Timor Leste's very complex linguistic panorama and the reality of its circumstances, but also looking at best practice and experience around the world in terms of language of instruction in schools. We're looking a little more specifically at what the role of the 16 other national languages, in addition to Tetum there are about 16 other languages spoken across the country. And we know from the research that UNESCO has done over 50 years, and that many other countries have done within their own nations, children often learn more quickly to read and write when they learn in the language that is spoken in their home. And so for the vast majority of Timorese kids that is one of those 16 languages. In some cases, particularly in the urban areas, it might be Tetum.

Lam: So in other words it's important for East Timorese children to master their own mother tongue before going on?

Gusmao: Exactly, exactly and this is not another anti-Portuguese initiative, where children learn to read and write and have a solid foundation in their mother tongue. We know that they will acquire second, third, fourth and fifth languages with greater facility, and will speak and use those languages better and with greater proficiency in the future.

Lam: And from your observation do East Timorese children have the facility or indeed a leaning towards learning foreign languages, are they interested?

Gusmao: It's a very interesting landscape there. Timorese people have a tremendous ability to acquire other languages, it's a polyglot society, so I think there is huge potential there in terms of being able to assist children to build really strong multicultural, multi-lingual society. But we need to make sure that we get it right in the early years of primary education.

Lam: I've also noted the importance placed on Chinese. Now I think many of our listeners are not aware that Chinese is actually spoken in albeit very small parts, but certainly spoken in East Timor?

Gusmao: Yes that's right, there is a very strong Chinese presence and has been for a very long time in Timor Leste. I think for reasons of Timor Leste's place in the world it's very important that we consider whether or not Mandarin be spoken perhaps as an elective the secondary school years. The focus of the work that the National Education Commission is doing now though is very much on basic education, so that early years of education looking at what languages children should be taught in at the time that they acquire basic literacy skills. So when they learn to read and write.

Lam: And of course children can't learn to read and write without a full tummy so poverty alleviation is key to education, how are you doing on that front?

Gusmao: Absolutely there's so many factors affecting how children learn and their physical wellbeing is an important one. The government with the help of the World Food Program has put in place a school feeding program, which does provide primary school age children with a meal. There are difficulties logistically with rolling that out across the country, but there are efforts being made in that regard. But obviously the long term solution is to provide jobs and provide economic opportunities for families to be able to feed their large families.

Economy & investment

East Timor PM prepared to block Sunrise gas: report

Reuters - May 31, 2010

Canberra – East Timor Prime Minister Xanana Gusmao is prepared to block the multi-billion dollar Timor Sea development of the Greater Sunrise gas field by Australia's Woodside Petroleum, a report said on Monday.

Woodside and partners have come under pressure from Dili over their plan to develop a floating liquefied natural gas platform to exploit the fields.

Gusmao was quoted as telling The Age newspaper: "many developing countries fall victim to the corporate resource giants exploiting and plundering their sovereign resources".

"Timor-Leste will be the country that goes down in history as the nation to put a stop to it," Gusmao added.

The Greater Sunrise field straddles the waters of East Timor and Australia and hold 5.13 trillion cubic feet of gas as well as 300 million barrels of valuable condensate.

Australia and East Timor reached a deal four years ago to split billions of dollars of field royalties, but East Timor has insisted the gas should be piped and processed onshore to create much-needed jobs, and its own petroleum industry.

Partners in the Greater Sunrise field are US major ConocoPhillips, Shell and Japan's Osaka Gas.

The Age reported Woodside last week walked out of Dili's National Petroleum Authority regulator after it refused to accept the company's draft plan for a floating platform. The NPA insisted Woodside submit parallel plans for pipelines to both Darwin and East Timor.

Timorese leaders will later on Monday intensify their campaign for the gas to be piped to East Timor for processing, The Age said, accusing Woodside and its partners of pressing for a floating plant so that it can develop new technology.

Unless there was a deal helping lift Timor's people from poverty, "then we will wait until many generations have learnt the lesson that humanity comes before commercial realities", Gusmao was quoted as saying.

"We will be the nation that others follow. Oil giants will be forced to change their indecent behaviour," he said.

Woodside has said the East Timor government's opposition to its development plan was premature, arguing that the floating LNG plan was the most compelling and would bring more revenue to the citizens of East Timor than any other option

East Timor ready to rip up gas deal

Sydney Morning Herald - May 31, 2010

Lindsay Murdoch – The Prime Minister of East Timor, Xanana Gusmao, has vowed to make a historic stand against corporate giants that plunder the resources of tiny nations, signalling his country is prepared to forgo billions of dollars from the Greater Sunrise gas fields in the Timor Sea.

Stepping up pressure on Australian-based Woodside over its plans to develop a floating liquefied natural gas platform above the fields, Mr Gusmao said: "Many developing countries fall victim to the corporate resource giants exploiting and plundering the sovereign resources of impoverished nations.

"Timor-Leste [East Timor] will be the country that goes down in history as the nation to put a stop to it," Mr Gusmao told the Herald at the weekend.

Mr Gusmao also criticised Woodside for appointing the former Australian diplomat Brendan Augustin as its manager in East Timor. "We viewed his appointment as another example of the continued disregard and disrespect Woodside has demonstrated towards our country and our people."

During speeches in East Timor over the past week, Mr Gusmao has repeatedly referred to Woodside's failed $1 billion operation in the impoverished north-west African country of Mauritania, which collapsed amid alleged corruption, shady money deals, police interrogations and a coup.

Mr Augustin, who was placed at the forefront of the Mauritania operation while on unpaid leave from the Department of Foreign Affairs and Trade, has not been accused of any wrongdoing. But his appointment raised questions about the relationship between the department and Woodside.

A Woodside spokesman said the company was "deeply disappointed at the personal attack on one of its employees".

Mr Augustin and another Woodside executive walked out of the office of the National Petroleum Authority, the regulator of East Timor's petroleum industry, in Dili on May 18.

The authority had refused to accept Woodside's draft plan for a floating platform, insisting the company also submit detailed plans for pipelines to both Darwin and East Timor. Woodside says its draft development plan has been formally lodged, while the authority insists it has not.

East Timor's leaders will today intensify their campaign for the gas to be piped to a processing plant in East Timor by releasing a statement that accuses Woodside and its joint venture partners of wanting to push ahead with a floating plant so it can develop new technology.

Mr Gusmao said his country would not pay for unproven technology at the expense of the Timorese. "Here in Timor-Leste we struggled long and hard for our independence, here our soil carries the blood of those who fought for our freedom, so we respect our laws, our sovereignty and our democratic institutions," he said.

Woodside's chief executive, Don Voelte, has insisted East Timor cannot walk away from the agreement.

East Timor accuse Woodside of lying

Australian Associated Press - May 27, 2010

East Timor's prime minister said an Australian consortium is trying to steal his country's natural resources from a gas field it's developing in the Timor Sea.

East Timor wants a pipeline to be built from the gas field to Dili, and Prime Minister Xanana Gusmao told a gathering on Tuesday that the consortium was ignoring that preference.

The consortium led by Woodside Petroleum Ltd said in April it preferred loading tankers at sea from a world-first floating plant, but a final decision has not been made. Australia has not commented on the plan but has said it would like a pipeline to its northern city of Darwin.

"I don't believe Woodside company because it is a liar," Gusmao said. "They intend to steal our oil and gas in the Timor Sea as they don't want to bring the pipeline to East Timor."

The massive Greater Sunrise gas field in the sea between Australia and East Timor is estimated to hold 240 million barrels of light oil and 154 billion cubic metres of natural gas worth tens of billions of dollars.

East Timor sees the resources as key to lifting its 1.1 million people out of poverty by stimulating the local economy and creating jobs. The nation has no major industry and unemployment is more than 30 per cent.

Gusmao said the consortium had broken its promise to provide training for East Timorese engineers and has only hired 30 local people in its Timor Sea exploration.

"I call on the people of East Timor and the country's leaders, we must be united to defend our wealth in the Timor Sea and the pipeline must come to East Timor, not to Darwin or floating as Woodside's desires," Gusmao said.

Darwin is 450 kilometres from Greater Sunrise. East Timor is closer, but Woodside says a deep trench off the East Timorese coast would make building a pipeline there more difficult.

Woodside and partners Royal Dutch/Shell, Osaka Gas and ConocoPhillips are licensed to develop Greater Sunrise.

East Timor denies progress on Woodside Sunrise LNG

Reuters - May 26, 2010

Perth – Australia's Woodside Petroleum has not successfully lodged a proposal to East Timor's government to develop the Sunrise gas project using a floating liquefaction plant, the tiny nation's petroleum regulator said.

Woodside said on Friday it had already submitted a proposal, but East Timor's National Petroleum Authority said the firm and its partners had failed to provide feasibility studies of all other development options, including an onshore facility in East Timor.

"Accordingly, a lodgement would title a formal receipt document issued by the National Petroleum Authority, which was not and has not been issued," Gualdino Da Silva, President of ANP, said in a statement issued late on Tuesday.

Woodside officials could not immediately be reached for comment.

Greater Sunrise – the largest known petroleum resource in the Timor Sea – straddles the waters of East Timor and Australia and hold 5.13 trillion cubic feet of gas as well as 300 million barrels of valuable condensate.

Dili has insisted that the gas should be piped and processed onshore, in a bid to create its own petroleum industry and create jobs for the impoverished nation.

Partners in the Greater Sunrise field are US major ConocoPhillips, Shell and Japan's Osaka Gas.

Australia and East Timor reached a deal four years ago to evenly split billions of dollars of field royalties, but East Timor's President Jose Ramos-Horta had wanted jobs from processing to be based in the impoverished country.

Woodside has said the East Timor government's opposition to its development plan was premature, arguing that the floating LNG plan was the most compelling and would bring more revenue to the citizens of East Timor than any other option.

East Timor regulator refuses to accept Woodside plan

Bloomberg News - May 26, 2010

James Paton – East Timor's petroleum regulator has refused to accept Woodside Petroleum Ltd.'s plan to develop the Sunrise gas project, insisting on more detailed analysis of alternatives, including a plant in the southeast Asian nation.

"Woodside and its partners have not done their homework properly," Gualdino Da Silva, president of the National Petroleum Authority in East Timor, said in a telephone interview from Dili yesterday.

Australia's second-largest oil and gas producer and its partners, including Royal Dutch Shell Plc, selected floating liquefied natural gas technology for the Sunrise project in the Timor Sea, the Perth-based company announced April 29. The use of a floating plant is the best commercial option, and East Timor and Australia would each receive more than A$13 billion ($11 billion) in revenue, Woodside Chief Executive Officer Don Voelte said May 21.

The government of East Timor has remained opposed to any proposal that doesn't include building a plant on its soil to process the gas into LNG. Woodside ruled out that option because it was more expensive, Voelte said. The Sunrise partners also considered piping the gas to Darwin in northern Australia.

Woodside rose 1.8 percent to A$42.10 in Sydney, while the benchmark S&P/ASX 200 Index gained 1 percent.

"Sunrise is unlikely to be going anywhere in the near future given the political impasse with East Timor," Neil Beveridge, an analyst at Sanford C. Bernstein in Hong Kong, said in an e-mail today. With Woodside focusing on an expansion of its A$13 billion Pluto LNG venture in Western Australia, the company is "probably in no rush to be making compromises."

Threw documents back

The Australian company and the East Timor regulator dispute whether the Sunrise partners' proposal has been lodged with authorities in the country. Voelte said last week Woodside executives presented the plan to the regulator in Dili.

"We were trying to deliver our field development plan, which we did successfully deliver, but they went running out after us and threw it back in the car because I think they were told not to accept it," Voelte said in Sydney. Voelte said he met for more than two hours this month with East Timor President Jose Ramos- Horta, without seeing Prime Minister Xanana Gusmao.

Da Silva said the petroleum authority wouldn't single out a Sunrise proposal for evaluation until Woodside and the Sunrise partners had provided "in-depth" analysis on all three development options and had reached an "in-principle" agreement with the two governments.

The Woodside executives walked out of the May 18 meeting in Dili after officials from the regulator explained their position, Da Silva said.

The Australian company has received requests to meet with regulators in East Timor and Australia since the May 18 Dili meeting and "looks forward to continuing engagement," Roger Martin, a Woodside spokesman in Perth, said in an e-mail today.

Voelte said the companies and the governments are required by a treaty to select the best commercial option for the field. Woodside has a 33 percent stake in Sunrise. ConocoPhillips has 30 percent, Shell owns 27 percent and Osaka Gas Co. 10 percent.

The East Timorese regulator is concerned about the Sunrise delays, Da Silva said. Still, "we are not going to accept this and expedite this just for the sake of the revenues," he said. "We'd like to do this properly. We should not compromise the framework in place and the need for alignment between the stakeholders."

[Editors: John Viljoen, Alex Devine.]

Woodside still working with East Timor to resolve gas dispute

Bloomberg - May 21, 2010

James Paton – Woodside Petroleum Ltd. Chief Executive Officer Don Voelte said he's still seeking to resolve a dispute with East Timor over how to develop the Sunrise project after meeting with the country's president.

"There is disappointment that has to be dissipated," Voelte said. "The people I have found are very professional, very emotional over the issues. We plan to work with them and get something that's the best answer for both countries."

While East Timor has rejected a plan by Woodside and its partners to use floating liquefied natural gas technology at the Sunrise venture, Voelte said in Sydney today he believes that it's the best commercial option and would deliver the most revenue to both countries. East Timor has said it remains opposed to any proposal that doesn't include a plant on its soil.

Voelte said he met for more than two hours earlier this month with East Timor President Jose Ramos-Horta, without seeing Prime Minister Xanana Gusmao. "We've struggled a bit with the Prime Minister's office," he told reporters after an American Chamber of Commerce in Australia lunch.

Piping the gas to an LNG facility in East Timor would be an "expensive" option, he said. Woodside, Royal Dutch Shell Plc, ConocoPhillips and Osaka Gas Co. aim to use a floating LNG platform to produce 4 million metric tons of the fuel a year from the field which lies between Australia and East Timor.

The development plan for the Sunrise project was "officially lodged" with an East Timorese regulator, Voelte said, even though officials tossed the documents back into a car as the Woodside delegation left a meeting in the capital Dili.

The two countries completed a treaty in 2007 for the administration of the Timor Sea field, which straddles a boundary between Australian waters and an area the nations manage jointly. They agreed to share royalties.

Woodside owns 33 percent and is the operator, ConocoPhillips has a 30 percent stake, Shell has about 27 percent, and Osaka Gas Co. 10 percent.

Timor takes Sunrise case to ASX

Melbourne Age - May 13, 2010

Lindsay Murdoch – The East Timorese government has complained to the ASX about Woodside's announcement that it plans to build a floating liquefied natural gas platform above the multibillion- dollar Greater Sunrise field in the Timor Sea.

A briefing prepared for East Timor's parliament says that in a letter to the ASX, the government has accused Woodside of not providing the public and press with accurate information about the status of the project.

The letter says statements by Woodside have "the potential to mislead the market as to the true position with regard to the development of the Greater Sunrise project".

It says the statements "may have an impact upon the way in which Woodside is perceived by the market and thus [have] an impact upon its share price". The letter reiterates demands by East Timor's leaders that the Woodside-led consortium build a pipeline to a processing plant on their country's south coast.

Amid growing acrimony over the project, the leaders have said repeatedly they would not approve either a floating platform or piping the gas to an existing plant in Darwin, which the consortium also considered.

The letter says the government's stand had been made "patently apparent to Woodside". It also says it is clear from a number of recent press releases, and other releases of information, that "Woodside has ignored the government's position".

In the letter, East Timor asks the ASX to instruct Woodside to correct statements the company made about Greater Sunrise in its 2009 annual report, market statements and statements made at the company's annual general meeting on April 30.

Those statements "clearly give the public and investors the impression that a decision on the development of the Greater Sunrise field is imminent and that it is Woodside and its joint- venture partners that have the final say as to how the development should proceed".

The letter says Woodside's statements had failed to acknowledge that the "Greater Sunrise fields cannot be developed" without East Timor's consent. The letter asks Woodside to inform the ASX and the public within seven days "as to the true position with regard to the development of the Greater Sunrise field". It says this includes that negotiations on development of the field are ongoing with relevant authorities in East Timor, and that "no decisions will be made regarding the development of the field until such a time as all necessary mechanisms for negotiation and discussion of issues relating to the project have been concluded".

East Timor asks for confirmation that Woodside would make no further releases that fail to acknowledge that East Timor has indicated it will not agree to any development of the field unless a pipeline is built from the field to East Timor. Woodside chief executive officer Don Voelte told journalists last week – after East Timor's Prime Minister, Xanana Gusmao, refused to meet him in Dili – that East Timor could not walk away from the Greater Sunrise agreement it signed only 2-and-a-half years ago.

Sunrise decision 'fails legal test'

Melbourne Age - May 7, 2010

Lindsay Murdoch – The regulator of East Timor's petroleum industry has accused Woodside of failing to comply with its legal obligations before announcing plans to build a floating liquefied natural gas platform above the Timor Sea's Greater Sunrise field.

In a confidential letter seen by BusinessDay, the independent National Petroleum Authority criticised Woodside for failing to provide regulators with detailed reports and its findings on all three possible development plans for the field before deciding on the floating platform.

East Timor's leaders have repeatedly demanded the gas be piped to a processing plant in East Timor and say they will not approve either a floating platform or piping the gas to Darwin, which the Woodside-led consortium also considered.

As accusations swirl around the multibillion-dollar joint venture, East Timor's Prime Minister, Xanana Gusmao, refused to meet Woodside chief executive Don Voelte in Dili yesterday, saying he would not compromise the "integrity" of "negotiation mechanisms".

A group of about 200 protesters prevented Mr Voelte and representatives of the other joint-venture partners from leaving Dili's VIP airport lounge for almost two hours yesterday.

After the tense standoff, the group was eventually allowed to leave for a meeting with East Timor's President, Jose Ramos Horta, who has asked for briefings on the project.

"We wanted Mr Voelte and his party to know that Timorese demand the gas be piped to East Timor to promote our economic growth and jobs," said Vincente Mauboci, the group's spokesman.

In a confidential letter dated May 4, Mr Gusmao told Mr Voelte he was "surprised" by the company's announcement about a floating platform and said he was convinced "there must have been a wrongful interpretation" of the Greater Sunrise agreement.

Comments by Mr Gusmao and other East Timorese political leaders about Greater Sunrise have fuelled nationalist sentiment in the nation of 1 million people.

Some influential Timorese believe that development of the field should be delayed and say the government in Dili should not be afraid of walking away from the deal in which East Timor and Australia would equally share $US40 billion ($A44 billion) in revenue.

East Timor is debt free and has almost $US6 billion of oil and gas revenue invested in the US, which is increasing by $US100 million a month.

But local institutions lack the capacity to provide the services and infrastructure needed to lift the majority of Timorese from poverty.

In his letter to Mr Voelte, Mr Gusmao, a former guerilla commander and revolutionary hero, challenged Woodside's pledge that building a floating platform would boost Timorese employment and training skills.

"As far as we know, from 2002 until now, there have only been seven Timorese officers working as trainees in ConocoPhillips," Mr Gusmao said, referring to Woodside's consortium partner.

"This suggests to us that the best we can look forward to under your concept is having another seven Timorese working with you."

Protest greets Sunrise chiefs in East Timor

Agence France Presse - May 7, 2010

Dili – Partners in the Sunrise gas field joint venture met East Timorese President Jose Ramos-Horta on Thursday after the government angrily rejected plans to process Timor Sea gas on a floating platform.

About 100 protesters greeted the delegation led by Australia's Woodside Petroleum as it arrived at Dili airport, in a show of opposition to the plans East Timor has said break Australia's obligations under a resources treaty.

Woodside chief executive Don Voelte told reporters the proposal for a floating LNG plant was still up for discussion and did not necessarily exclude East Timor's demands for a permanent plant on its shores.

But he added that while it would be technically feasible to pipe the gas to an onshore facility in East Timor, a floating plant makes more economic sense for everyone involved.

"Let me say that its a proposal at this time. Its a discussion, its a beginning of a round of information flowing," he told reporters. "Im not here to argue. Im not here to say its our way or the highway, but Im just saying the discussion begins at this time."

The Sunrise Joint Venture comprises Woodside (33.4 percent), ConocoPhillips (30 percent), Shell (26.6 percent) and Osaka Gas (10 percent).

Australia and East Timor agreed to split projected multi-billion dollar revenues 50-50 from the Greater Sunrise gas field in 2006, after protracted wrangling over their maritime boundary.

Shell would build and operate the floating platform, and estimates it will produce around four million tonnes of LNG a year as well as condensate.

East Timorese government spokesman Agio Pereira issued a statement last week accusing Woodside of "arrogance" by announcing the joint venture's preferred option without consulting Dili.

"This is not only a source of great concern, but reflects an unacceptable level of arrogance. The approach has significantly compromised future relations with the government of Timor-Leste," he said.

"Timor-Leste will not approve any development of Greater Sunrise that does not include a pipeline to Timor-Leste. The government considers Woodsides announcement a waste of valuable time, money and human capital."

Opposition Fretilin party secretary-general Mari Alkatiri accused the government of Prime Minister Xanana Gusmao of politicising the issue ahead of next year's elections.

"They have demonstrated their lack of capacity to deal with this issue. Politically its much better for them just to reject (the joint proposal) and make public statements of rejection because this is very political," he said.

A spokesman for Woodside said the Sunrise delegation was expected to meet government officials later Thursday.

Australia, East Timor still at odds over gas field

ABC News - May 4, 2010

The Federal Government has told East Timor it cannot invite another company to develop the Greater Sunrise gas fields in the Timor Sea.

East Timor prime minister Xanana Gusmao has rejected a decision by the developer Woodside to establish a floating platform to process the gas rather than a pipeline to either Darwin or Dili.

Resources Minister Martin Ferguson says East Timor and Australia freely entered into a treaty requiring Sunrise to be developed in the most economical way with the agreement of both sides.

"The sooner the recommendation is brought to the Sunrise commission for consideration, the better, because we can then actually have a look at the detailed work and the basis on which that recommendation has been made," Mr Ferguson said.

Opinion & analysis

Impasse on deal to plunder Timor's gas riches

National Times - May 10, 2010

Damien Kingsbury – East Timor President Xanana Gusmao is not budging over terms of a deal with Woodside on gas reserves in the Timor Sea.

A serious dispute has broken out between Australian oil company Woodside and the East Timorese government over the processing of gas from the Greater Sunrise field in the Timor Sea. The dispute looks set to lock up one of the richest gas fields in the region and cost Woodside hundreds of millions of dollars already spent on research and development.

At the heart of the dispute is East Timor's claim for natural gas taken from the joint Australian-East Timorese field to be processed into LNG in East Timor. Woodside has rejected that option, saying it wants to process the gas on a floating platform in the Timor Sea. The East Timorese government has said, however, that its position is not negotiable and that without an agreement on refining in East Timor there will be no deal to proceed with drilling.

Both the floating platform and on-shore processing is likely to cost about $5 billion to develop, which is the equivalent of East Timor's current financial reserves from which it derives interest to, in effect, run the country. The profit from the project, however, is expected to run into tens of billions of dollars.

East Timor's claim to have processing undertaken on-shore is similar, in essence, to the Australian government's extended tax on mining companies. It wants its people to receive greater benefit from national resources that will otherwise enrich a foreign-owned company. It also says that Australia already benefits from an earlier processing agreement and that it is now East Timor's turn to benefit.

East Timor sees its economic future built upon the oil and gas reserves in the Timor Sea. An on-shore processing plant would mean not just the initial massive investment, but will further require establishing related infrastructure, meaning significant secondary economic benefits, as well as technology transfers and the training of local workers.

This, the East Timorese government believes, would herald the start of East Timor's own petrochemical industry and its chance to leap-frog the development cycle from little more than subsistence to industrialised status.

But apart from the lack of existing infrastructure and questions over reliability if it is established, Woodside is also concerned about political instability. The East Timorese government argues that its political environment is now stable and that the gangs that caused havoc in 2006-7 have been brought under control. This is mostly correct.

East Timor is a quiet and safe place compared with 2006-7 and many of the underlying tensions fuelling that crisis have been resolved. However, with elections in 2012, or earlier, there could be a return to at least some of the discord that marked the 2007 elections.

More importantly, however, is that Woodside's investment is long-term, while East Timor's political stability remains, for now, short-term. Although Woodside is not saying this, any promises about control made by a current government might be disowned by a future government.

It would seem, then, that the way forward is through negotiation. However, East Timorese Prime Minister Xananaa Gusmao has increasingly dug himself into a "no compromise" position, in part playing to a domestic audience at a time of rising nationalist assertiveness.

For its own part, Woodside has been high-handed in its treatment of East Timor's war-hardened political leaders, who are particularly incensed at Woodside's unilateral announcement of its decision to proceed with a floating processing platform. Woodside boss Don Voelte tried to talk with Gusmao late last week to convince him of Woodside's proposition. Gusmao refused to meet him.

The line from the East Timorese government is that it is happy to leave the gas under the sea. It will always be there and its price can only increase as other supplies dwindle. Woodside and the Australian government, on the other hand, argue that the economic benefits from its proposal would fatten East Timor's coffers to the tune of about $13 billion, providing a stable economic base for a more considered, long-term, economic development program.

An agreement that develops some type of secondary on-shore processing, technology transfer and training would seem to be a part of any compromise deal. But at this stage, both parties are talking tough.

The East Timorese government has also threatened to look for an alternative partner, although Woodside and the East Timorese government disagree over whether their existing agreement would allow this. But even if East Timor can find another partner, despite what it might say before signing a new agreement, a new partner will likely be at least as self-interested as Woodside.

East Timor's political leaders are, reasonably, trying to promote the best interests of their fledgling state. But it is a hard world for a small, poor country and the petrochemical industry has never been a gentle development partner. Unless one gives way, it seems there will be no oil on (or gas from) these troubled waters.

[Professor Damien Kingsbury is from the School of International and Political Studies at Deakin University, and is author of East Timor: The Price of Liberty (Palgrave, 2009).]

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