On 14 June 2010, East Timor community figure Joao Quintao (57), a retired Indonesian military senior sergeant, said that the thousands of refugees from East Timor living in refugee settlements in East Nusa Tenggara have poor living conditions and were disappointed with government policy. Quintao made his comments at the Tuapukan refugee camp in Kupang.

According to Quintao, there are approximately 55,000 refugees from East Timor, or 11,000 families, living in West Timor. The refugees live in poor conditions, with some children unable to continue their schooling, and face a lack of land available for farming. While the government did build 11,000 houses for the families, Quintao said most had fallen down, and were never suitable for occupation because they had no bathrooms.

Quintao criticised the Indonesian Government's 2008 decision to withdraw the refugee status of the refugees from East Timor, saying such a decision must be an official, written announcement signed by a representative of the refugees and witnessed by a representative from the United Nations.

Moreover, Quintao stated that if the government is determined to say that there are no longer refugees from East Timor, thousands would request political asylum from friendly countries.

"Representatives of the community from East Timor in Belu, Kefamenanu and Soe have already agreed with this plan," said Quintao.

However, former pro-Indonesia militia commander Eurico Guterres stated that these comments were merely personal views.

"Residents are yet to release any statement from an official forum. We'll discuss all these matters at the congress for former East Timorese in September," Guterres stated.

[BBC Monitoring Asia Pacific.]

Justice & reconciliation

Dili must punish war criminals: Amnesty

Australian Associated Press - June 29, 2010

People who committed war crimes in East Timor during Indonesia's 1975-1999 occupation are going unpunished because of a loophole in the country's penal code, Amnesty International says.

East Timorese President Jose Ramos-Horta has rejected pressure from the United Nations and rights groups such as London-based Amnesty to prosecute war crimes suspects, saying such trials are not in the country's interests.

But Amnesty has again called on Dili to stop giving amnesties to war criminals and agree to the establishment of an international tribunal to provide justice to the victims.

"Survivors of decades of human rights violations in Timor-Leste are demanding justice and reparations but the authorities' routine use of amnesties, pardons and similar measures has created a culture of impunity," Amnesty researcher Isabelle Arradon said in a statement.

Arradon helped research an Amnesty report released on Tuesday about the culture of impunity in East Timor, or Timor-Leste as it is formally known, entitled "Timor-Leste: Justice in the Shadow".

"The authorities in Timor-Leste are compromising on justice to seek peace – but trading away justice for such serious crimes only undermines the rule of law, and cannot resolve the trauma of the past," Arradon said.

Amnesty says the legal loophole is the absence of a ban on amnesties, while the penal code also lacks provisions on co- operation with the International Criminal Court.

Indonesia ended its brutal 34-year military occupation of East Timor in 1999 after granting the former Portuguese colony a referendum on independence which resulted in an overwhelming vote to split from Jakarta.

More than 100,000 East Timorese were killed or starved to death during the occupation, and the weeks surrounding the referendum were marred by crimes against humanity committed by Indonesian forces and their militia proxies.

East Timor and Indonesia formed a truth and reconciliation commission which laid the blame for such crimes squarely at the feet of the Indonesian military but few of the perpetrators have faced justice.

Ramos-Horta says justice must be weighed against the fledgling democracy's economic and political destiny as the tiny eastern neighbour of Indonesia, the world's fourth most populous country.

The president pardoned and freed militia leader Joni Marques in 2008 after his 33-year sentence for crimes against humanity was substantially reduced.

And last year Dili sent another militia leader, Maternus Bere, to Indonesia before he faced trial over alleged massacres of civilians in 1999.

Human rights/law

Aussie woman to sue East Timor president

Australian Associated Press - June 15, 2010

Adam Gartrell – An Australian woman cleared of plotting to assassinate East Timor's top political leaders intends to sue the country's president for defamation.

Angelita Pires says President Jose Ramos Horta was a driving force behind allegations of her involvement in the February 2008 attempt on his life and the life of Prime Minister Xanana Gusmao.

"I have instructed my lawyers to take civil action against the people who defamed me, including the president," Ms Pires told AAP on Tuesday. "He must apologise and he must be responsible for the damage he has caused me."

At the time of the attacks Ms Pires, 44, was the lover of rebel leader Alfredo Reinado, who was shot dead during a gunfight that left Mr Ramos Horta critically wounded.

After his recovery, Mr Ramos Horta made a series of public statements making it clear he believed Ms Pires had been involved in the kill plots.

But with an appeals court this week upholding an earlier not guilty verdict, Ms Pires believes she is now entitled to redress. Ms Pires says she will return to East Timor "very soon" to pursue the legal action.

"They have done the wrong thing by me," she said. "If I didn't return that would be letting them get away with it."

Beyond that, Ms Pires is also planning a tilt at East Timorese politics to address social injustices like corruption and poverty.

Ms Pires is also working on an autobiography that will focus on her time with Mr Reinado. "Alfredo left behind a lot of good memories for me and I think it's important to set the record straight," she said.

The appeals court this week also reduced the sentences of some of the 24 men jailed over the attacks. But Ms Pires says she will not rest until all of Mr Reinado's men have been freed.

"They are innocent," she said. "The decision the judges made went totally against the evidence."

Aid & development

East Timor President angered by peace project closure

Melbourne Age - June 10, 2010

Lindsay Murdoch, Darwin – East Timor's President Jose Ramos Horta has attacked international aid agency AusAID for forcing the closure of what he says is one of his country's few successful aid projects.

Dr Ramos Horta said he would tell Prime Minister Kevin Rudd when he met him in Canberra later this month that the "vast majority" of donor aid sent to East Timor was spent on consultants, study missions, reports and recommendations.

In a blunt letter yesterday to Peter Heyward, Australia's ambassador in Dili, Dr Ramos Horta called on AusAID to reverse its decision to cut funding to a project operated by the Peace Dividend Trust that has redirected at least $16 million to poor Timorese entrepreneurs.

Launched in 2007, the project centres around a "Buy Local, Build Timor-Leste" campaign that matches international and national buyers and domestic suppliers, thereby steering aid funds directly into the Timorese economy.

Dr Ramos Horta said the project had changed the way the international community operated in East Timor and provided "unique critical services that support our efforts to create employment and build a viable economy. Unlike most donor-funded projects, it produces tangible results, creates jobs and generates tax revenue."

One of the project's main aims is to eliminate the role of international companies with rich aid contracts and highly paid foreign consultants. The process has been successfully replicated in Afghanistan and Haiti.

In his letter, which has been obtained by The Age, Dr Ramos Horta called on AusAID to extend and boost its funding for the project and consider adopting a "Timor-Leste First" policy for Australia's aid program.

The Peace Dividend Trust issued a statement this week saying its matchmaking, training, marketing and tender distribution operations in East Timor's 13 provinces would begin to be phased out from July 1 unless additional donor support could be found.

An AusAID spokeswoman told The Age that sometimes difficult decisions had to be made about where to spend finite resources. She said AusAID would provide funds so the Peace Dividend Trust project could link East Timorese businesses to opportunities through a business directory data base until mid-2011.

AusAID's decision to cut its funding for the project to only $120,000 in 2010-11 from a high of $1.2 million in 2007-8 coincides with a Rudd government review of the use of foreign aid technical advisers and a budget announcement that Australia's aid spending would more than double to $8 billion by 2015.

Foreign affairs

East Timor welcomes new Australian prime minister

Agence France Presse - June 25, 2010

Dili – East Timorese Prime Minister Xanana Gusmao on Friday welcomed new Australian Prime Minister Julia Gillard and thanked ousted leader Kevin Rudd for his "steadfast support".

"The peoples of Australia and Timor-Leste share a strong and mature friendship which will continue under the new leadership of Prime Minister Gillard," he said in a statement, using his country's formal name.

"We look forward to working with her and her cabinet on critical matters that concern both our countries and the region."

Gillard was appointed prime minister on Thursday after deposing Rudd as leader of the Labor party.

Australia has about 400 peacekeeping troops in its tiny northern neighbor East Timor, which is still dependent on foreign aid more than a decade after voting to split from Indonesia.

Economy & investment

Timor continues campaign for on-shore gas plant to ease poverty

Sydney Morning Herald - June 23, 2010

Kirsty Needham – Bringing an oil pipeline to East Timor would do more to alleviate poverty than Australia's $100 million aid program could achieve, East Timor's President, Jose Ramos-Horta, said last night.

Dr Ramos-Horta, on his first state visit to Australia since his evacuation to Darwin after an assassination attempt in 2008, will meet the Prime Minister, Kevin Rudd, in Canberra today.

Dr Ramos-Horta said last night a prosperous East Timor would benefit Australia in regional security terms, and economically, by increasing Timorese power to purchase Australian goods and creating a ripple effect in surrounding impoverished Indonesian provinces.

"The vast resources of the Timor Sea... can catapult Timor towards prosperity," he said. "This very generous aid [package] of $100 million, that's part of that vision, but even better still... let's look at the gas pipeline, the oil pipeline."

East Timor yesterday outlined a plan to develop a $4.3 billion oil and gas hub on its coast, but conceded it was still in negotiations with Australia over the Greater Sunrise project.

The lead joint venture partner, Woodside Petroleum, wants an offshore, floating gas plant, which it argues would be $4.7 billion cheaper. The East Timorese government has objected to the plan because it believes an onshore plant will create more local jobs.

Dr Ramos-Horta said he was open-minded about the outcome of the oil and gas debate with the federal government. "The pipeline is not a monument, a monument is a symbol of pride," he said.

Sharing the stage with the chancellor of the Australian National University, Gareth Evans, the former foreign affairs minister who signed the Timor Gap treaty with Indonesia, Dr Ramos-Horta offered a polite apology for his castigation of Mr Evans at the time.

He had later learnt Australian officials had been forceful with the Indonesian government "behind the scenes", he said.

Woodside hoping Timor will soften stance

The Australian - June 23, 2010

Matt Chambers – When East Timor President Jose Ramos Horta fronts the National Press Club in Canberra today, the Greater Sunrise gas partners – led by Woodside Petroleum – are hoping for a softening in rhetoric from the small country, which has railed against development plans for the huge resource.

Since plans to develop the Timor Sea gasfields through a floating LNG plant were announced in April, East Timor Prime Minister Xanana Gusmao has vehemently opposed them, saying he will only accept development through an LNG plant on East Timor.

He has called Woodside a liar trying to steal the fledgling nation's oil and gas. Political experts and commentators have also said East Timor's recent decision to accept training from China's navy on two gunboats was a pointed diplomatic rebuff to Australia that was related to the Woodside stoush.

But Mr Ramos Horta has been more measured than Mr Gusmao. His more conciliatory tone at meetings with Woodside chief Don Voelte, who will be in Canberra today, and other senior executives have given the partners hope that Mr Gusmao's comments include some political posturing to score points off East Timor's opposition Fretilin Party.

After abandoning studies of an East Timor plant more than a year ago, citing difficulties crossing a 3km-deep ocean trench, Woodside and its partners last month also scrapped the option of developing the fields through a Darwin LNG plant.

Sources from among the Sunrise partners say the decision was partly made because there was no way East Timor would have accepted a Darwin plant. They also say the strength of Mr Gusmao's subsequent negative response to a floating LNG plant was surprising.

East Timor has shown no signs it is prepared to entertain an $US11 billion ($12.5 billion)-plus floating LNG plant. Instead, it has continued to accuse Woodside and its partners of not fully investigating an East Timor option.

Mr Gusmao said Australia would get a greater share of the benefits of a floating LNG plant, for which Darwin would be a likely service hub.

"Diplomatic tensions remain an ongoing issue for the Sunrise project," Deutsche Bank analyst John Hirjee said. He said Sunrise had only a 30 per cent chance of going ahead.

The good news for Woodside shareholders was that the market was not even pricing that into Woodside's share price. No value has been ascribed to Sunrise, according to Deutsche Bank analysis.

Under treaty arrangements between Australia and East Timor, which share gas from the fields 50-50, Sunrise needs to be developed to the best commercial advantage in accordance with best oilfield practice.

On June 3, Mr Voelte said that the East Timor plant option would have had capital costs $US5 billion higher than the proposed floating LNG plant, itself estimated to cost more than $US11 billion.

He said also that $US13 billion of revenue would be delivered to East Timor. East Timor shot back the next day. "Voelte omitted the operating costs over the life of the project along with fiscal and taxation regimes which demonstrate Timor LNG offers lower wages, maintenance costs and with a 10 per cent flat applicable tax rate," Secretary of State Agio Pereira said.

"The pipeline to East Timor becomes the most economically attractive option and offers the most commercial rate of return."

Mr Pereira said in an email that piping LNG to East Timor would cost "significantly less" than $US11 billion.

"This would be consistent with the fact the field is 150km from the shores of East Timor... extensive studies have confirmed a pipeline is a much more economically viable and technically feasible option than floating LNG," he said.

Relations between the partners (including Shell and ConocoPhillips) and East Timor have soured since late April, when Woodside confirmed floating LNG as the preferred option.

East Timor's National Petroleum Authority, which oversees the Joint Petroleum Development Area shared by Australia and East Timor, has not welcomed the proposal.

At the end of a meeting last month with two Woodside executives, said to be have been cordial until East Timorese press arrived, petroleum authority president Gualdino da Silva refused to accept documents on the plan from Woodside.

A guard threw the documents in the back of the Woodside executives' vehicle as they left.

Mr Pereira has said that if Sunrise was not approved by 2013 or LNG production not started by 2017, existing treaties could be cancelled and project developments stalled while new treaties between Australia and East Timor were worked out.

Woodside is hoping Mr Ramos-Horta, a candidate to succeed Kofi Annan as UN secretary-general, will place more emphasis on international treaty obligations, requiring the Sunrise partners to develop the oilfields to best commercial practice.

But if a speech to the Northern Territory Parliament in late 2008 is a guide, Mr Ramos-Horta's rhetoric is not far removed from that of Mr Gusmao. Mr Ramos-Horta, who at the time was prime minister, said the decision on where to develop the field needed to be made on a technical and commercial basis.

But he said it needed to be worked out by an independent study. "We will not bow to unilateral decisions made by these infamous CEOs who mismanaged world multinationals," Mr Ramos-Horta said in the speech, which was during the depths of the global financial crisis.

"I, for one, prefer to forgo Greater Sunrise than surrender to the dictates of a bunch of oil executive millionaires."

Countdown to dispute

1972

Australia and Indonesia sign a seabed boundary treaty, establishing a boundary much closer to Indonesia than to Australia. Since Portugal (the colonial ruler of East Timor at that time) refused to participate in the discussions, the boundary is incomplete, resulting in the "Timor Gap".

1989

Australia and Indonesia agree on the Timor Gap Treaty, which divides revenue from the seabed resources in the Gap. The Treaty defines a Zone of Co-operation.

2000

Australia and the United Nations Transitional Administration in East Timor (UNTAET) sign a memorandum of understanding over future revenues from Timor Sea oil and gas fields, renaming the ZOC as a Joint Petroleum Development Area (JPDA); continues 50-50 revenue split from earlier treaties with Indonesia.

2001

UNTAET and Timorese prime minister Mari Alkatiri sign the Timor Sea Arrangement with Australia, which increases East Timor's share of upstream oil and gas revenues from the JPDA to 90 per cent.

2002

May: East Timor gains complete independence. Australia and East Timor sign the Timor Sea Treaty to replace the 2001 Timor Sea Arrangement, with similar terms.

2004

Production at Bayu Undan gas field begins; project is expected to earn $100m a year.

2006

Jan: Australia and East Timor sign the Treaty on Certain Maritime Arrangements in the Timor Sea, raising Timor's share of revenues from Greater Sunrise from 18% to 50%, but pushing determination of a permanent maritime boundary from 30 to 50 years into the future.

2008

Jul: Woodside, studying three development options for the Greater Sunrise gas fields, rejects the option of an East Timor LNG plant, saying it was not commercially attractive. Instead, a Darwin LNG plant or floating LNG plant would be considered.
Nov: East Timorese President Jose Ramos Horta says the country would not bow to the pressures of Woodside "CEO millionaires" and would be prepared to block development of the project.

2010

Jan: East Timor says the LNG project should be based on the option that best contributes to the development of the nation.
Apr: Woodside and its partners say they plan to develop Sunrise through a floating LNG plant. East Timor says it is prepared to reject the plan.
May: Australian Resources Minister Martin Ferguson says East Timor needs to meet its international obligations over Timor Sea treaties that say development is a commercial matter for the proponents. Woodside CEO Don Voelte says East Timor cannot legally block the development.
Jun: Voelte says building the floating LNG plant in East Timor would provide additional revenues of at least $US13 billion for the country. The East Timorese government says an onshore plant would provide $US65 billion of revenue, and continues calls for Woodside to provide costings for all development options, including a possible onshore processing plant.

East Timor's president in Australia to discuss gas deal

Radio Australia - June 23, 2010

East Timor's President Jose Ramos Horta is using a state visit to Australia to try to calm escalating tensions over the development of the Greater Sunrise oil and gas field in the Timor Sea. He's still pushing for a pipeline take the gas for processing in East Timor, rather than go with Greater Sunrise Consortium's preference of a floating processing facility. Dr Ramos-Horta's speaking very diplomatically in Canberra, but he has not backed away from the option that he thinks will help move East Timor move from poverty to sustainable prosperity.

Presenter: Linda Mottram

Speakers: Jose Ramos Horta, President East Timor

Mottram: Doctor Ramos Horta is on a state visit to Australia, including a state dinner with Australia's Governor General, calls on several state governors and the opening of East Timor's new embassy in Canberra. But it'll be in talks with Australia's Prime Minister, Kevin Rudd, that some of the tensions in the relationship are most likely to be discussed. The single biggest one of those is the issue of where to process the Greater Sunrise gas which promises to be a bonanza.

Questions about the effectiveness of Australia's development assistance to East Timor has also been a running sore. And the tone of statements from East Timor on these issues has grown very loud. So how then does Doctor Ramos Horta characterise the current state of his country's relationship with Australia?

Ramos-Horta: The relationship is on very sound footing. Like any relationship, there is always some tensions particularly when it involves oil and gas. And I'm not at all worried about it. On the Australian side I presume understands some of the emotions in Timor Leste. But at the end of day all of us in Timor Leste realise that there are two very important relationship for us in this region, Australia and Indonesia. In regard to oil and gas discussions, the doors are still open, both sides. Today a press statement issued by our side, the government that has primary responsibility on this saying that talks are continuing to try to figure out what is really the best option for the development of Greater Sunrise.

Mottram: One of your ministers told Radio Australia just about a week or two ago if there wasn't a pipeline, the project wouldn't go ahead, that your side was happy to leave the gas in the ground for the next generation. Is that just an ambit claim?

Ramos-Horta: That's obviously always one option. But today the statement that came out from the Prime Minsiter's office indicate willingness on the part of the government to continue the dialogue with oil companies.

Mottram: Doctor Ramos Horta said he did have an open mind on the issue of what is, as required under the treaty governing this issue, the most economic way to develop the gas field. But he also said East Timor didn't have to take the word of the consortium of resource giants charged with bringing the gas to market that the floating LNG processing option, of FLNG, was necessarily the economic winner. He suggested independent studies to assess the issue. And he appealed to Australia to look beyond what he called narrow economic interests.

Ramos-Horta: If I were the Prime Minister of Australia and if I were the top oil executives and others sitting in Canberra I would look at the region as a whole. I wouldn't look only at my narrow economic, commercial interests. I would look at what is in the best interests of Australia. I would see look at that peace, stability, prosperity in the wider Pacific Asia region is of utmost importance to Australia.

Mottram: He said he believed the pipeline to East Timor, to spark the development of an indigenous East Timorese resource processing industry, was the answer... and he believed more economically viable that the floating option. He also dismissed claims that his tiny country lacks the skills or is too unstable for the task, pointing out that Australia imports skills and that countries like Angola, at war for 30 years, never failed to get the oil out.

Doctor Ramos Horta is clearly in Australia to smooth the waters on this issue, but also to deploy his diplomatic skill in the interests of winning this argument against one of its biggest neighbours and some equally powerful corporate interests.

East Timor wants best commercial solution on Sunrise

Dow Jones - June 22, 2010

Ray Brindal and Rachel Pannett, Canberra – East Timor President Jose Ramos-Horta said Wednesday a decision on a site for a plant to process gas from the Greater Sunrise field will be made on commercial grounds, but whether the plant goes ahead will depend on the cost of a pipeline needed to haul the gas to East Timor.

The consortium of investors in Greater Sunrise and the East Timorese government will find the best option that makes commercial and financial sense, but "it all boils down to how much the pipeline will cost," he said in an address to the National Press Club.

If it proves too expensive to haul gas to East Timor through a pipeline for processing into liquefied natural gas, "then we have to think twice. We don't want a white elephant," he said.

The Sunrise partners – Australia's Woodside Petroleum Ltd., Royal Dutch Shell PLC (RDSB) and ConocoPhillips (COP) – want to develop the Greater Sunrise gas resource using untried floating LNG technology at the site of the resource, which straddles Australian and East Timorese waters in the Timor Sea. Woodside has said a floating LNG vessel would be A$5 billion cheaper than an onshore LNG plant in East Timor.

East Timor, which must approve the development with Australia, Tuesday said it intends to present a development plan later this year to key stakeholders in the Greater Sunrise field for a US$3.8 billion onshore LNG plant.

The consortium believes an undersea pipeline to East Timor is too costly at around US$19 billion as it has to span the Timor Trench, a massive 3,300 meters deep trough offshore East Timor's southeast coast, Ramos-Horta said.

But East Timor has had discussions with regional petroleum experts, including from Indonesia, who say such a pipeline would cost US$13 billion.

"So let's look at that. I'm not dismissing the consortium's claims, but I find it absolutely exaggerated," he said, adding that the East Timorese government is "open minded" about the location of the LNG plant and wants to discuss all options.

"I believe we can find a resolution of this in a short period of time," he said.

"At face value, without seeing any detailed financial and technical studies, of all the options I would want to see the pipeline coming to Timor-Leste because I see the benefits in job creation and (contribution) to our economy," Ramos-Horta said. "I don't support a pipeline out of patriotic duty."

"But I want to see also the cost of it, both in terms of environmental impact, as well as the financial and commercial cost," he added.

Ramos-Horta also said he would like to enlist the help of Australian Prime Minister Kevin Rudd to press East Timor's claim as it is in Australia's interest to have a stable and prosperous East Timor.

"Why not push the consortium to bring the pipeline to Timor- Leste?" because a prosperous Timor Leste will be of great benefit to Australia through its citizens having greater purchasing power, he said.

Pipeline makes best sense, says East Timor's Horta

Radio Australia - June 22, 2010

Linda Mottram, Canberra

East Timor's President Jose Ramos Horta is using a state visit to Australia to fight against plans to process gas from the Timor Sea on a floating platform, and not via a pipeline in East Timor.

Dr Ramos Horta's engagements include talks with Prime Minister Kevin Rudd – where he says he will also raise concerns about the effectiveness of Australia's development assistance.

The President says East Timor's future could be secured through a domestic gas processing industry. But he is suggesting independent specialists be called in to decide the issue.

Economic

"Obviously, I'm not entirely objective, being president of my country," he said in Canberra. "I believe the pipeline option to Timor Leste makes more economic, commercial sense."

Dr Ramos Horta was moving to calm the tone of a debate that has escalated after the Greater Sunrise consortium rejected the pipeline and announced a floating processing facility was the most economic option.

But he says a pipeline and processing industry in East Timor holds the best hope for sustainable prosperity for his country.

"If I were the Prime Minister of Australia and if I were the top oil executives and others sitting in Canberra I would look at the region as a whole. I wouldn't look only at my narrow economic, commercial interests."

The President will deliver his first major speech in Australia for two years on the challenges and prospects for democracy in his still fledgling country.

Also among his engagements during a four-day state visit will be the inauguration of a new embassy for his country in Canberra and a private discussion with the Australian Parliament's foreign affairs, defence and trade committee.

East Timor rejects Woodside's gas processing plan

Radio Australia - June 9, 2010

East Timor's government is emphatic it would rather leave the Greater Sunrise gas deposits under the Timor Sea than drop its demand the gas be piped to East Timor for processing. In the long running saga of the field, Sunrise leaseholder Woodside recently lodged a "best commercial advantage" report and a draft development plan, concluding that platform-based processing was the most viable. In a sharply worded rebuff, East Timor last week listed a raft of administrative hurdles... rejecting outright Woodside's claims.

Presenter: Linda Mottram

Speakers: Alfredo Pires, East Timor's Minister for Natural Resources; Jim Dunn, author and former advisor to the UN mission in East Timor

Mottram: At a closed resources conference in Sydney last week, Woodside chief executive Don Voelte outlined the joint venture's work on the options for processing the Greater Sunrise gas... concluding that a floating processing facility was the best economic option, not a pipeline to either Australia or East Timor. Woodside had fulfilled its obligations under international treaties and had an option that he said exceeds all the company's threshold economic hurdles.

The outcome has inflamed passions in East Timor. Alfredo Pires is East Timor's Minister for Natural Resources.

Pires: Our policies have been very clear that if it's not piped to Timor Leste then yes we would be prepared to leave it as a deposit for future generations.

Mottram: That would mean that you would forgo significant income from the project does that concern you at all?

Pires: No this is not a question of managing our finances. I mean financially we are quite stable, maybe too stable in that regard. We are the biggest nation with the biggest surplus of 6 to 8- Billion dollars and it's growing by 100-Million dollars a month.

Mottram: There's also another, smaller field that will start production in East Timor next year and a number of other blocks in the exploration stage in what the minister says are very prospective areas. That, Alfredo Pires says, makes it possible for East Timor to put off the exploitation of the Greater Sunrise deposits.

Pires: We are in a position to be able to sit and wait basically.

Mottram: But East Timor has challenged Woodside's position more fundamentally, claiming in a very terse statement that there are a range of technical requirements that Woodside hasn't fulfilled. It questions why the size of the field has been revised down, though Woodside's documents are said to give a detailed explanation of fluctuations in estimates as exploration goes on. Still Alfredo Pires accuses Woodside of running away from what's required of it and says the option of the pipeline to Dili still has not been explored and costed, at least to Dili's satisfaction.

Pires: One pipeline has gone to Australia and is benefiting quite a lot the people of Australia so the next one should benefit Timor Leste. So that's basically on a fair go sort of principle.

Mottram: That's not specifically written into the treaty though is it that one pipeline goes one way, one goes the other?

Pires: No, no but it's how you interpret the treaty. It's very quite clearly stated that it needs to be for the benefit of the two nations.

Mottram: Veteran diplomat, author and former advisor to the UN mission in East Timor, Jim Dunn, says he understands why East Timor's leaders are pushing the issue so hard.

Dunn: Because of course they witnessed their own weakness, their frailty when they saw that when the development of the oil fields began everything went to Darwin and they really felt that some of the processing or the advantages of having an oil field ought to go to Timor itself where of course the infrastructure can be appropriately developed. Whereas the oil companies feel that in fact the infrastructure's too weak.

Mottram: Jim Dunn highlights the continuing under-development of much of East Timor, and the slow pace of creating the infrastructure for sophisticated onshore processing for the country's oil and gas wealth.

Dunn: The Timorese leaders would say look if we don't press them to do this now it'll never happen. They really want to benefit not just from having the oil out there and getting some royalties from it but actually having, taking part in the processing of the exploration.

Mottram: And Jim Dunn suggests resource companies should take more account of East Timor's development needs.

Dunn: We shouldn't forget that only just over ten years ago East Timor was a nation reduced to ashes. I mean 73% of all houses and buildings had been destroyed or severely damaged and the virtual infrastructure had gone. So they still have a long way to go to become in any way prosperous apart from the facade.

Mottram: Woodside has declined an interview on the issues. The fate of the Greater Sunrise project is now in the hands of the Australian and East Timorese regulatory authorities.

East Timor, Woodside further apart on gas deal

Melbourne Age - June 5, 2010

Lindsay Murdoch, Darwin – East Timor has accused Woodside of "grandstanding" over its plans to build a floating liquefied natural gas platform above the Timor Sea's Greater Sunrise field, in the latest salvo in an acrimonious stand-off over the multibillion-dollar project.

Government spokesman Agio Pereira accused Woodside's chief executive Don Voelte of trying to justify what he called the company's "untenable" position when he told the UBS Resources Conference this week that it was "time for this project's day in the sun".

"Let me be very clear, this time, Timor Leste (East Timor) has the knowledge, expertise, international support and time to get this right and ensure a fair and equitable outcome," Mr Pereira said in a statement released in Dili.

East Timor's leaders have bluntly rejected Woodside's plans, insisting the company and its joint-venture partners pipe its gas to a processing plant in East Timor.

Woodside claims it has formally lodged a development plan with the National Petroleum Authority, regulator of East Timor's petroleum industry, as it is required to do under the Greater Sunrise agreement signed 2-and-a-half years ago.

But the authority insists the company has not fulfilled its legal requirements under the agreement and says the plan has not been accepted.

"The ball's back in Woodside's court," Mr Pereira said. "Woodside can grandstand through the media and speeches or they can do their due diligence, required to re-establish the processes necessary through the appropriate mechanisms," he said.

Mr Pereira reiterated his government's stand that a floating platform "does not provide the best commercial advantage in line with best oilfield practice".

He said that while Woodside claimed that East Timor would receive $US13 billion ($A15.3 billion) in income from the floating platform, it would make at least $US65 billion if the gas was processed on shore.

Mr Pereira said Mr Voelte failed to share with his conference audience that if the development plan was not approved by 2013 or if Sunrise LNG production has not started by 2017, the project agreement could be cancelled and Sunrise activity suspended until a new agreement could be negotiated.

Woodside declined to comment last night.

East Timor gas plant too costly: Woodside

The Australian - June 4, 2010

Matt Chambers – Woodside Petroleum expects development of the Greater Sunrise gasfields through a floating liquefied natural gas platform to cost more than $US11 billion ($13 billion) – but this will be $US5 billion cheaper than building an onshore plant in East Timor.

Chief executive Don Voelte yesterday revealed the difference in cost between the Sunrise joint venture's preferred floating LNG (FLNG) option, and East Timor's preference for an onshore plant, as tensions over the big Timor Sea gasfields worsened.

East Timor argues that floating LNG is untested, risky technology. Mr Voelte said the East Timor option had been thoroughly investigated.

"We found that there were no technical impediments to TLNG (a Timor plant). However, it has the highest capital cost by approximately $US5 billion compared to FLNG, and presents technical risks," he said.

East Timor has previously accused the Sunrise partners – Woodside, Shell and ConocoPhillips – of failing to seriously consider a plant on East Timor, but the partners deny this.

Mr Voelte said the Sunrise project was a sister to Shell's more advanced Prelude FLNG project, pointing to Wood Mackenzie analysis that showed Prelude had an internal rate of return of about 15 per cent.

Wood Mackenzie also estimated Prelude would cost $US11 billion to develop. "It is anticipated Sunrise will have a higher capex than Prelude... driven by Sunrise's larger resource and higher planned production rates," Mr Voelte said.

Sunrise was in calmer waters, with a larger resource base and lower levels of carbon dioxide and other impurities, he said. It is understood costs for the other rejected option for Sunrise – a Darwin LNG plant – are somewhere between the other two options.

East Timor has said the risks to FLNG take away from its competitiveness. Government spokesman Agio Pereira warned FLNG was a complex, untested option.

"(It is) hardly the cheapest option given the uncertainty, long- term maritime risks and the significant technical challenges, many of which have yet to be identified," he said.

East Timor blasts Woodside Petroleum over Sunrise plans

Agence France Presse - June 1, 2010

Dili – East Timor on Tuesday accused Australian company Woodside Petroleum of trampling its sovereign rights as it again rejected plans to process Timor Sea gas on a floating platform.

Partners in the Sunrise gas field joint venture including Woodside and Shell submitted a report outlining their preference for a floating platform to the East Timorese government in May.

But East Timorese government spokesman Agio Pereira issued a statement accusing Woodside of ignoring Dili's sovereign interests as enshrined in East Timor's treaties with Australia over joint exploitation of the area.

"Woodside and the joint-venture partners can only join and assist the two countries in implementing a policy for the Timor Sea when and if they, as operators, fully understand, accept and comply with the overarching principles established by the treaties in force," he said.

"Authorised drilling of petroleum in the Timor Sea offshore, and the integrated processing of it, shall promote long-term investment in the territories and the peoples of Timor Leste and Australia, and not only Australia," he added, using East Timor's formal name.

"The decision on how the peoples' resources and seas should be best integrated and developed is a sovereign decision, not a commercial trade."

He said the Sunrise joint venture's preference for a floating platform instead of a permanent processing plant in East Timor smacked of self-interest.

"Woodside has chosen the best commercial advantage for Woodside and the jv partners," he said. A floating platform carried an unacceptably "high level of uncertainty and risk", he added.

Woodside chief executive Don Voelte told reporters in Dili in May that the proposal for a floating LNG plant was still up for discussion. But he added that while it would be technically feasible to pipe the gas to an onshore facility in East Timor, a floating plant made more economic sense.

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 have agreed to split projected multi-billion dollar revenues 50-50 from the Greater Sunrise gas field. (smc/mtp)

Defense & security

Relations strained as East Timor buys Chinese navy boats

Sydney Morning Herald - June 7, 2010

Lindsay Murdoch, Darwin – Two 43-metre Chinese-made navy patrol boats mounted with 30-millimetre cannon, initially to be crewed by Chinese sailors, will be launched in East Timor this week in what observers say is a slap in the face for Australian diplomacy.

The 1960s-designed 175-tonne Shanghai class boats have arrived in East Timor at a time of strained relations between the Rudd government and the four-party coalition in Dili led by the former guerilla fighter, Xanana Gusmao.

East Timor bought the boats from a Chinese company in 2008 without first consulting Australia, which has had hundreds of troops deployed in the country since 2006.

Ian Storey, an expert on East Timor's relationship with China, told the Herald that the government in Dili had bought the boats to "demonstrate to Canberra that it has other choices when it comes to defence partners".

But Dr Storey, a fellow at the Institute of Southeast Asian Studies in Singapore, said that as he understands it the boats will be used for fishery protection duties "and in that sense, have no inherent strategic value... that is, nothing for neighbouring countries to worry about".

A statement from East Timor's Ministry of Defence and Security said the boats, which will initially be manned by Chinese crews while Timorese undergo training, will be able to travel 1000 kilometres and remain at sea without land support for a week. The Defence Minister, Julio Tomas Pinto, said the boats were an "urgent" response to combat illegal activities in East Timor's exclusive economic zone.

East Timor's navy consists of ageing and smaller Portuguese-made Albatross class boats. Its $US28 million ($34 million) purchase of the boats from Poly Technologies, a subsidiary of China Poly Group, a defence company with close ties to the Chinese military, stirred controversy in East Timor. The government made the purchase without conducting an open tender process.

It came when China was spending millions of dollars to establish an economic, diplomatic and strategic foothold in the half-island nation.

Dr Storey wrote in the Jamestown Foundation's China Brief last year that one of China's primary interests in East Timor is to gain access to the country's oil and gas reserves. "So far, however, it has made little headway," he wrote.

Australia's relationship with East Timor is at its lowest point since the country gained its independence in 2002, observers in East Timor say. In fiery speeches in rural provinces in recent weeks, Mr Gusmao has been attacking plans by Woodside Petroleum to build a floating liquefied natural gas platform above the multi-billion Greater Sunrise field in the Timor Sea. Timorese media has quoted him as saying that the Timorese must unite to stop Australia stealing their wealth as it did in 1989 when it signed an agreement with Indonesia to carve up resources in Timor.

Mr Gusmao is threatening to block the Greater Sunrise project unless the consortium pipes the gas to a plant in East Timor. Woodside estimates Australia and East Timor would share a $US32 billion profit from a floating development at the field. Tempo Semanal, a newspaper published in Dili, said relations between Canberra and Dili have sunk to a point where they can almost no longer talk with each other. The newspaper said the dispute over Greater Sunrise is one reason, pointing also to failed Australian aid programs.

"Australia needs to know that the poor relations are not just about Woodside. There is history here. The history is mostly bad," said the newspaper, which is run by the most high-profile journalist in East Timor, Jose Belo.

A spokeswoman for the Defence Department said "the sale of the boats is a bilateral matter between East Timor and China". She said: "Australia was pleased to provide English language training to 36 [East Timorese defence] personnel to prepare them for patrol boat training in China".

East Timor navy buys Chinese boats

Radio Australia - June 7, 2010

A military parade and blessing ceremony is planned in East Timor later this week to formally mark the arrival of two patrol boats purchased from China. The Shanghai-three-class vessels will be used to combat illegal fishing and other illicit activities in East Timor's territorial waters. East Timor's 2008 decision to go with the Chinese made vessels came as China sought to exert more influence through the use of so-called soft power, in general in developing nations, and specifically in oil and gas rich East Timor. With the boats now moored in East Timor, Australia is saying it's a bilateral matter for East Timor and China.

Presenter: Linda Mottram

Speaker: Anna Powles, East Timor security analyst

Mottram: The cacophany as the two vessels arrived in East Timor late last month, destined for their new home at Hera naval base. The boats were purchased in a deal with China's Poly Technology for 28-Million U-S dollars... with payments being made in five installments between 2008 and 2010. On the bridge as the vessels arrived, an East Timorese officer was watched by Chinese counterparts.

Mottram: East Timor's Secretary of State for Defence, Julio Tomas Pinto, who's written in detail about the failings of East Timor's security sector, was also on hand for the arrival... all captured by Tempo Semanal newspaper and posted on their website.

Mottram: His ministry released a statement saying the vessels were necessary and urgent for use by the East Timorese maritime police and national navy in response to illegal activities in east Timor's exclusive economic zone... including illegal fishing and human trafficking, as part of an evolving East Timorese national defence policy.

The 1960s vessels, including mounted machine guns, reportedly have a range of more than 700 miles, with the ability to stay at sea for a week without land support.

At the time East Timor was considering the Chinese option, in April 2008, Australia's defence department says it sent a maritime needs analysis team to East Timor, to look at options for maritime security co-operation, including the possibility that East Timor could participate in Australia's long-standing Pacific Patrolboat Program. The deal for the Shanghai class vessels was announced that very month, to complement two existing Portuguese made patrol boats, as the Australian analyis was being done. The analysis team concluded that it would be "surplus to identified needs," as an Australian defence spokesman put it, for East Timor to take part in the Pacific Patrol Boat scheme. China it seems, got in first, in an area Australia's foreign affairs department agrees is a priority for the East Timorese government.

Powles: It's absolutely critical that Timor has the capacity to monitor and conduct surveillance over it's maritime area.

Mottram: Anna Powles is an East Timor based security analyst, who says China offered the vessels which were she says a pretty good deal.

Powles: And it is part and parcel of Timor's growing relationship with China.

Mottram: China was the first country to establish diplomatic relations with East Timor at its independence in 2002. It has notably built some major buildings in the country... particularly paying for a Ministry of Foreign Affairs Building and the Presidential Palace in Dili. China has a growing number of workers in the country with East Timor's oil and gas wealth an obvious attraction. And China has backed East Timor as a viable state, even when violence triggered doubts among others. So while Chinese aid to East Timor ranks well down the list of international donors, it has been seen by East Timor's government as a counter-balance to dependence particularly on Australia.

Observers caution against suggestions that China's role is a necessarily a matter for concern, though it could be argued that a gap has been left for China where Australian has failed to engage as effectively as it could have, in areas like security and the role of the Australian Defence Force, as well as questions about the effectiveness of Australia's aid program and critically in oil and gas, with ongoing tensions with Australia over the development of the Sunrise oil and gasfields. Anna Powles says an offer of patrol boats from Australia might have helped.

Powles: Well I think it would have made asbolute sense considering that Australia does engage in that kind of assistance throughout the Pacific region and it certainly would have made perfect sense in terms of its relationship with Timor and the fact that Timor and Australia are in such close vicinity and shares a common interest in terms of maritime security.

Mottram: Australia's Foreign Affairs Department says it doesn't expect to be consulted on other governments' commercial arrangements with third parties and that Australia was pleased that it was able to provide English language training to 36 Timorese Defence personnel to prepare them for patrol boat training in China.

Opinion & analysis

Gas sparks a new battle in the Timor Sea

National Times - June 17, 2010

Damien Kingsbury – Australia's relationship with East Timor is at its lowest ebb since 2005 when Alexander Downer bullied then Prime Minister Mari Alkatiri into accepting a fundamentally unfair division of the Timor Sea between the two countries.

Since then, however, Australia has sent troops and police to help control serious instability in 2006 and has continued to be East Timor's single largest aid provider.

Yet in recent weeks, Prime Minister Xanana Gusmao has attacked Australia in ways that have left diplomats reeling and which are beginning to cast doubts over the future of the relationship. The fallout between the countries is being driven from within East Timor. In this, confusing categories play a major role, as illustrated by East Timorese journalist Jose Belo.

Belo focused on East Timor receiving two Chinese Jaco-class patrol boats, rather than accepting similar craft under the Australian Pacific patrol boat scheme. Belo complained that accepting Australian patrol boats would come with strings attached, including overarching Australian command and intelligence being routed through Australia, which he viewed as "neo-colonial" and, parroting PM Gusmao, an infringement of East Timorese sovereignty.

Instead, East Timor has accepted the Chinese boats, complete with Chinese regular sailors as "training crews". The Australian offer included training and in-country advisors, in a parallel capacity to Australian army training and support for the East Timor Defence Force.

East Timor's concerns about sharing intelligence diminishing its sovereignty is nonsense. All friendly countries share intelligence in areas of mutual interest. So, what of Belo's other concerns?

Belo complains about Australian aid to East Timor, failing to recognise it is the largest aid supplier, that the aid budget has just increased again and that most of its projects, such as in water supply and health, have delivered tangible benefits to the East Timorese.

Belo says other projects have not delivered desired outcomes.

What Belo fails to say, however, is that Australian supports justice behind the scenes in management and logistics. In that the justice sector is failing, this is due to using Portuguese – which is spoken by at best 15 per cent of the population – poor local training and local interference.

Financial management is improving with Australian aid but the biggest impediment is the appalling low skills base of its trainees. Non-water infrastructure development in East Timor is the responsibility of its own government, not Australian aid.

Australia is increasingly the fall-guy for complaints about foreigners in general.

Belo complains about corruption and a lack of accountability – problems that are entirely home-grown.

If the people of East Timor wonder why, eight years after independence, they have not developed further, the first reason is because development is slow, especially when starting with no infrastructure and little capacity to learn skills. Australia can help but it cannot and should not do everything.

In East Timor, over the past year or so, there has also been a pronounced tendency to regard international assistance as an entitlement. This author has experienced a push, from Baucau to Balibo, to assume control of this "entitlement" without accountability or transparency. That is, Australia is obliged to provide unaccountable funds for East Timorese to do with what they choose. That is not how aid works.

But more importantly, after decolonisation, things get worse – due to lack of infrastructure, skills and capital – before they get better. If East Timor is angry over its colonial past, it might do better to look at the signal failures of Portuguese colonialism and the brutality of Indonesia, rather than Australian aid.

So what is really behind this anger coming from East Timor? Belo gave it away when he said that Australia and East Timor have long had disagreements over the Timor Sea.

East Timor agreed, albeit under undue pressure, to the Timor Sea Treaty to put off resolving the sea boundary issue until 2055. Many East Timorese remain angry about this. That is why, under the terms of the Greater Sunrise gas field agreement, rather than opting for an 80-20 split as per the treaty, Australia opted for a 50-50 split of royalties on that project.

And this is what it is all really about: the Greater Sunrise gas field and Woodside Petroleum's decision to build a floating processing platform rather than accede to East Timorese demands to build a processing plant on East Timor's southern coast.

East Timor wants the infrastructure and technology transfer such a development implies. But Woodside has baulked at the extra $US5 billion cost, the technical difficulties of building a gas pipeline in a deep sea trench and the sovereign risk of building in a still fragile country.

Gusmao believes in the absence of this, the gas can stay under the ocean or East Timor can find an alternative development partner. By beating up on Australia for matters that are not within the remit of its government, he cannot but send a negative signal to anyone interested in East Timor.

If anyone has concerns about East Timor's sovereign risk – the unpredictability of its government – East Timor's increasingly shrill claims only serve to heighten them.

[Professor Damien Kingsbury is with the School of International and Political Studies at Deakin University, and is author of East Timor: The Price of Freedom. He is currently researching political issues in East Timor under an Australian Research Council Grant.]

Watching East Timor as China gets a military toehold

The Punch - June 15, 2010

Paul Toohey – East Timorese Prime Minister Xanana Gusmao has taken in recent weeks to heavily bagging Australia, including a strange speech in which he, seemingly apropos of nothing, dug deep into the past and said Australia had selfishly cost the lives of 60,000 East Timorese by coming to Timor to "wage war" against the Japanese in World War II.

Gusmao has also been claiming Australian interference in its sovereign rights. Australia is studying the rhetoric closely, with good reason. As Gusmao slams Australia, his country's biggest aid donor, Gusmao has allowed China for the first time to gain a small de facto military foothold in East Timor.

China now has naval training crews operating out of Dili aboard two gunboats which East Timor bought from China, and which were formally handed over last week. Gusmao's attacks on Australia, and his newfound military cooperation with China, are seen as related.

It all ties into Gusmao's fury that Woodside Petroleum, an Australian company, has decided to build a floating natural gas platform in the Greater Sunrise field in the Timor Sea, rather than piping the liquefied gas onshore to Timor. Gusmao wants to see the gas coming ashore in Timor, in order to kick-start real industry in his country, and to provide Timorese with skills.

Woodside thinks building a pipeline across deep water to Timor, and an onshore plant, is too expensive. Gusmao appears to have the notion that the Australian government is an arm of Woodside, and that it is actively supporting Woodside's decision. He is threatening to block the project, which would see $32bn in revenue shared between the governments of Timor and Australia.

While it has been known for several years that East Timor would buy the Jaco-class patrol boats from China, it was not anticipated that they would be operated by, for the foreseeable future, the Chinese navy. Fairfax media reported this as a "slap in the face for Australian diplomacy".

It is just a couple of boats, and it makes sense that the Chinese navy should provide training to the people who buy their boats. But up till now, the role of training Timorese military has fallen, by mutual consent, to Australia.

China is interested in Timor's oil and gas, not to mention its strategic location. It has been a heavy donor, gifting the people of Timor an imposing presidential palace, a defence force headquarters and ministry of foreign affairs building. Now it is forging what could be seen as military ties.

"Australia is reasonably relaxed but there is probably concern that China is increasing its influence in Timor in fairly direct ways," said Professor Damien Kingsbury, a Timor expert at Deakin University's School of International and Political Studies. "It's not just soft power and generous aid. When you have Chinese crews on Chinese military vessels, in Timorese waters under a Timorese flag, it does potentially raise concerns."

East Timor nestles between Indonesia and Australia. Both countries might – along with the US – be uncomfortable about the new arrangements with China, especially when seen in light of Gusmao's increasingly intemperate remarks about Australia.

On Friday, at the handover ceremony of the patrol boats, Gusmao attacked on Australia's supposed interference in its sovereign rights. This was presumably done for the benefit of Australia's ambassador to East Timor, Peter Heywood, who attended.

Gusmao said: "This decision [to buy the boats from China] caused some public outcry, and above all, drew criticism from some countries, particularly Australia, which was greatly surprised at not having been consulted in this process."

In fact, East Timor's decision to buy the boats drew no public outcry from Australian political leaders whatsoever, nor has there been any public condemnation of the decision to use Chinese naval crews. But Indonesia and Australia, which each sent a naval patrol boat to the ceremony, must have listened on bemused.

Kingsbury doubts Australia diplomats have privately dressed down Gusmao over the gunboats, or his remarks in general, and are instead maintaining a gentle and conciliatory approach. But Gusmao is clearly nursing a savage temper for Australia and no one is too sure where it will take him.

Gusmao has been remarkably forgiving on Indonesia for the blood it spilt on his land, but he is not so forgiving with Australia when it comes to oil and gas. The anger goes back to 1989, when former foreign minister Gareth Evans, with his Indonesian counterpart, Ali Alatas, signed the Timor Sea Treaty, which divided oil and gas spoils off the south coast of Timor and, once again, confirmed the official Australian view that Indonesia's occupancy of Timor was legitimate.

In 2005, with East Timor now independent, then foreign minister, Alexander Downer, struck an agreement to defer for 50 years all maritime disputes in the Timor Gap, and for government revenues from the Greater Sunrise oil and gas field (which hangs over the edge of the Timor Gap area, in disputed waters) to be shared 50:50 between the two countries.

Many East Timorese believe Australia has ripped them off on oil and gas, by claiming its territorial waters push right up against the south coast of Timor. But Timor's frustrations on this have been relatively mute for several years (perhaps in the light of the Australian military being called in, twice since 2006, to restore order within the country).

Gusmao reactivated the bitterness in a speech to development partners in Dili, on April 7. He veered widely from the subject of development, complaining (accurately) that the US had given Indonesia permission to invade East Timor in 1975, and adding that the US, France and Germany had provided Indonesia with "weapons, tanks, fighters and training, so as to annihilate the resistance of our small guerrilla army".

He saved the real blast for Australia. "Adding insult to injury," he said, "after recognising the integration – the only Western country to do so – Australia signed an agreement with Indonesia, in 1989, to share the wealth of the Timor Sea. Meanwhile, around 200,000 Timorese died trying to protect their rights during the 24 years of war.

"[W]e had the Japanese occupation from 1941 to 1945. Although short-lived, this occupation covered the entire country and caused great suffering to the Timorese, including the deaths of around 60,000 people. According to reliable opinions, this suffering could have been prevented if the Australian forces had not come to Timor-Leste in order to wage war here, so as to prevent the Japanese from invading Australia."

It was true that Australia had gone to (then) Portuguese Timor in order to protect Australia. But what was Gusmao saying? That the occupancy of the Japanese imperial army was preferable? And what, by the way, would have become of the Timorese people at war's end had they sided openly with Japan?

More to the point, why bring this up at a development partners meeting? The subtext was Woodside.

"Gusmao has been ramping this up over the last six or so weeks," said Kingsbury. "Australia has been wondering where all this is coming from. On one hand, the formal relationship is in pretty good shape, but some of the rhetoric is pretty fiery and there is concern that it has the potential to destabilise the relationship.

"It's overwhelmingly about Woodside. There's a couple of other issues about the direction of Australia aid, but if you dig down even that is predicated on having a go at Australia about Woodside. The view in Timor is that the Australian government has a direct hand in the Woodside process. The view of Australia, obviously, is that it doesn't."

Kingsbury said comments by Resources Minister Martin Ferguson that Woodside's decision to build a floating plant was purely commercial, and that the government had no say in it, was interpreted in Timor as Ferguson's implicit support of Woodside.

"There is an assumption that the Australian government has a capacity to control Woodside," said Kingsbury. Gusmao seems to think the Australian government could – or should – threaten Woodside into piping gas onshore to Timor. "But that would make current debate over the resources tax a drop in the ocean," said Kingsbury. "That would be direct interference in the commercial operations of a private company and short of Australia becoming Cuba, I can't see that happening."

At the gunboat handover ceremony on Friday, Gusmao told those present that East Timor could not consider itself independent "if every time we are to make a fundamental decision, we have to consult our neighbouring, friendly and partner countries".

Even as the overall level of Australian aid to East Timor increases, Gusmao is indeed well within his rights to make sovereign decisions. But it appears he is intent on dragging some of the quiet off-stage concerns that Australia has expressed to him into the light. And he is sidling up to China in order to vent his anger at Australia over Woodside.

"Australia is probably looking askance at the crews because that does put a Chinese military presence pretty close to Australian sovereign waters," said Kingsbury. "That's a legitimate issue but there hasn't been anything public said about it. There may have been some private discussions, but no bullying or threats associated with it. I think it's a case that any commentary, or discussion, is perceived as interference.

"That's a very traditional position for a number of countries in South-East Asia. If there is any commentary on affairs in China, that's seen as interference. Up until 1998, in Indonesia, they took the same view."

Kingsbury believes that East Timor considers, for the time being, Australia a more valuable friend than China. So is this just a little dummy spit by Gusmao, a reflection of his desire to see Timor stand on its own, or something more? "They're very aware of the reality of geographic proximity and they're very aware Australia is easily their biggest aid donor, and is likely to continue to be," said Kingsbury. "They're very aware that the boundary maritime issues need to be negotiated with Australia in the future. Australia, particularly under Downer, has played a tough game. They know Australia can be a good friend but a tough opponent. But they're not going to make an enemy out of Australia."

Yet it appears that is precisely what Gusmao is trying to do. Kingsbury says it must be remembered that Gusmao is currently working across the nation, trying to talk up a major infrastructure program to improve roads, water, sanitation and electricity. The people on the south coast of Timor are particularly bereft when it comes to these basic commodities, and Gusmao believes if Woodside were to come onshore in that part of Timor, much would improve for them.

"What is disconcerting to the Australian government is the intemperate and the inflammatory use of language," said Kingsbury. "Xanana and the government have done pretty well in the first few years of office, but not everything's gone their way. (Opposition party) Fretilin has scored some wins in the nationalist debate and certainly Xanana's having a go at Australia, but he's also speaking to a domestic audience as he talks up the infrastructure program. He's trying to rally the troops."

Australia has been a schizophrenic friend to Timor, variously abandoning it, liberating it, screwing it and helping it. And it is arguable that our debts to Timor are not yet paid in full. Perhaps mindful of that, Australia is letting Gusmao rant and rave, hoping he'll calm down before he says - or does - something he might truly regret.

Dili delivers Woodside broadside

Asia Times - June 10, 2010

Simon Roughneen – East Timor's government has declined a proposal by Australian oil and gas company Woodside to process gas drawn from the Greater Sunrise field on board a floating liquefied natural gas (LNG) plant in the Timor Sea, claiming that it would be deprived of tens of billions of dollars in much needed revenues under the arrangement.

As the conflict between Australia's second-largest energy company and one of the world's newest and poorest island countries (whose official name is Democratic Republic of Timor-Leste) escalates, there is no quick resolution in sight. Dili may seek to prevent the plan coming into force and thereby seek a revision of the three treaties that underpin the Greater Sunrise project. Under the current agreement, East Timor has only the option to veto any arrangement to extract the gas which it disapproves.

Dili has accused Woodside and its partner companies of "grandstanding" over their plans for the multibillion-dollar floating processing project, and has said under no circumstances would it consent to the plans. The government also claims that the company has not followed all the procedures outlined in various international agreements between East Timor and Australia.

For its part, Woodside says that an onshore plant in East Timor "presents significant technical risks", according to a presentation (available on the Woodside website) given by chief executive officer Don Voelte to an investors conference in Sydney on June 3. Citing concerns about running a pipeline through the "seismically-active" 3,000 meter-deep Timor Sea trench to the Timorese coast, Woodside says that East Timor's infrastructure deficit would add "approximately US$5 billion" to the capital cost versus the projected cost of the floating plant. The company has accused the East Timor government of "posturing".

Dili has latched on to Woodside's admission that "there were no technical impediments" to processing the LNG onshore in East Timor. According to Dili-based La'o Hamutuk, also known as the Timor-Leste Institute for Development Monitoring and Analysis, the country's State Secretariat for Natural Resources (SERN) created a Sunrise Task Force in mid-2008 "to develop their own information on the technical, economic and social aspects of the Sunrise project."

That task force has been supported by Malaysian energy giant Petronas and Korea Gas, suggesting that Dili is courting other multinational suitors to exploit its share of the field as a counterweight to its existing commercial arrangements with Woodside. East Timor has said that it does not want to be Woodside's "guinea pig", claiming that there are as yet no other floating LNG processing projects in place anywhere in the world.

"This argument is weak... such projects are underway around the world from Brazil to Indonesia," said Anatoliy Kurmanaev, oil and gas analyst at Business Monitor International. "There are inherent risks to any new technology, but prospects for any environmental disasters are limited. No floating re-gasification facility has had a serious leak yet and they've been in operation for decades."

While Woodside and its partners have talked up the socio-economic benefits that East Timor would accrue through the proposed offshore facility, Dili says it would receive more benefit if the processing was done onshore. With a 33% share, Woodside is marginally the largest company involved in the Greater Sunrise project; other players are Conoco-Phillips (30%), Royal Dutch- Shell (27%) and Osaka Gas (10%).

The commercial reality is that Woodside is making its decisions first and foremost based on the bottom line and shareholder interests, though in this case within the parameters set by the existing bilateral treaties between Dili and Canberra. The Timorese government wants the gas piped to a "greenfield" LNG processing plant on the country's southern coast, saying that this would give the country billions in additional energy revenue and facilitate the development of spin-off industries.

Government spokesman Agio Pereira said those industries would help to create "five to thirteen times the proportionate revenue" of the fuel exploitation. In a June 4 statement entitled "Timor- Leste Can Wait", the government outlined its projection that it would generate a "minimum of [$65 billion] in additional revenue to rebuild the impoverished nation which has endured 24 years of war before gaining independence eight years ago".

The Australian government says it has no influence over decisions made by Woodside and its partners. The simmering issue nonetheless threatens to undermine bilateral relations. Australia provides A$100 million (US$90.7 million) per annum in overseas aid to its northern half-island neighbor.

An April 28 statement issued by the Australian High Commission in Dili said "Any suggestion that Australia has threatened Timor- Leste on the issue is incorrect. Australia's long-standing position is that a decision about development of Greater Sunrise is for the commercial partners to make, consistent with the treaties Australia and Timor-Leste have negotiated."

One of the options assessed by Woodside and the joint venture partners was to pipe the gas to an existing plant at Darwin on Australia's northern coast. Timor watcher and professor at Deakin University Damian Kingsbury commented on the East Timor Action Network (ETAN) website that "the assumption that the Australian government has, more than influence, a directing hand in this affair is incorrect".

He added that "the 'floating platform' option does not especially benefit Australia. It is a fairly neutral outcome in terms of flow-on benefits – one only has to go to Darwin to see the disappointment there with the decision to know this is not a pro-Australia outcome."

However, the perception is growing in East Timor that Australia is trying to steal Timorese gas, as seen in a number of recent angry articles in the East Timor press that have conflated Australia's presence and policy towards the country with the controversial Woodside proposal.

At the same time, China has pushed ahead with the latest in a series of high-profile partnership projects, with East Timor's navy now the owner of two new Chinese vessels. Although China's official aid to East Timor is far less than major donors, including Australia, Portugal and the European Union, Beijing has focused on lavish government building efforts, such as the new Presidential Palace, that are prominent in the public eye as Chinese gifts to the impoverished new nation.

President Ramos-Horta and others have meanwhile engaged in diatribes against the vast overseas presence in East Timor since Indonesia's withdrawal in 1999, adding to the perception that many Western aid workers are vastly overpaid consultants who do little more than advise Timorese officials. A 2009 study showed that more than US$8 billion in aid had been spent in the country since 1999, but it remains possibly Asia's poorest nation in real terms. A counter-argument would point to what Ramos-Horta has described as entrenched corruption in the country's bureaucracy as an alternative and internal inhibition to development.

Figures of per capital gross domestic product of more than US$2,000 are based on the assumption oil and gas money will flow into the countryside and are not a reflection of what the average Timorese actually earns or spends. Around 90% of the population works in agriculture, much of which is subsistence, with unemployment rising to 40% for urban youth. The US Central Intelligence Agency Factbook's entry on East Timor says "the technology-intensive [oil and gas] industry, however, has done little to create jobs for the unemployed because there are no production facilities in Timor."

Driven by energy revenues and high government spending, economic growth has in recent years hit double digit figures, albeit from an extremely low base. The Timorese government has big spending plans, much of which is supposed to be financed on oil and gas largesse. Prime Minister Xanana Gusmao recently launched a summary of his country's new 20-year strategic development plan entitled "From Conflict to Prosperity". He said "We are determined to take Timor-Leste out of the list of fragile and poor states and make it a medium-income country in 15 to 20 years."

Critics argue that his government is aiming to spend existing energy-earned funds too quickly, undermining the logic behind the country's escrow-style Petroleum Fund, which is designed to ensure that the country spends oil and gas revenues responsibly and has plenty of money in the bank after the Timor Sea reserves are depleted.

East Timor is prepared to wait for Greater Sunrise if it means it gets better terms. Charles Scheiner of La'o Hamutuk told Asia Times Online that the 12-13 years of revenue accruing from the existing Bayu Undan field should tide the government over for the meantime – notwithstanding fluctuating oil and gas prices and if the government over time spends money responsibly.

The pipeline for this field, the other major one in the Timor Sea, already runs to Australia. Scheiner adds that East Timor would get much more value-added from a Greater Sunrise extraction project further down the line, and that a delay would hopefully see the country in a better position – in terms of infrastructure, human resources and know-how – to maximize revenues and the developmental impact of the project.

Another reason for Dili to hold off might be an opportunity to revisit the terms for extraction from the Greater Sunrise field. If a development plan is not approved by February 2013, or if extraction does not take place by 2017, then either Australia or East Timor can cancel the existing arrangements, meaning that Sunrise development would be suspended until a new treaty was in place.

Woodside's Voelte told the conference in Sydney that the combined effect of two of the treaties underpinning the Greater Sunrise project is "that approximately 82% of Greater Sunrise oil and gas is apportioned to Australia and approximately 18% to Timor- Leste."

He said that the 2007 Certain Maritime Arrangements in the Timor Sea (CMATS) treaty between Australia and East Timor "provides for the even distribution of upstream petroleum revenues from Greater Sunrise. Effectively this more than doubles the petroleum revenue to be received by Timor-Leste."

That assessment indicates that East Timor is getting a good deal. However, Scheiner believes that "some of the treaties and contracts derive out of an era of illegal occupation", referring to Indonesia's 24-year hold on its tiny neighbor, which was not recognized under international law.

Geographically, the Greater Sunrise field is much closer to East Timor than Australia, and under the UN Convention on the Law of the Sea (UNCLOS), maritime boundaries are generally drawn halfway between the land boundaries of the respective countries. That assessment would put the field in Timorese waters, contrary to the existing maritime boundaries, which were divvied-up between Indonesia and Australia. So Dili may have room yet to hold out until its gets its onshore LNG plant.

[Simon Roughneen is a journalist covering Southeast Asia. His website is www.simonroughneen.com.]

Australian oil company bullies East Timor

Direct Action - June 2010

Jon Lamb – The East Timorese government is refusing to accept a proposal by Australian-based exploration company Woodside Petroleum to develop the Greater Sunrise gas deposit in the Timor Sea with a huge floating processing plant. Despite heavy pressure from Woodside, with the backing of the Australian government, East Timor is adamant that the gas should be processed in East Timor.

Woodside announced the proposal on April 29, claiming it to be the most commercially viable option. However, this has been rejected by all sectors of the East Timorese political elite. The Xanana Gusmao-led Parliamentary Majority Alliance (AMP) and the leadership of the main opposition party, Fretilin, are united in demanding that the gas be piped from Greater Sunrise to East Timor.

Greater Sunrise is expected to generate at least $13 billion in revenue for both East Timor and Australia. Woodside has consistently argued that a deep-sea pipeline is not technically possible or is too expensive. East Timor has conducted its own independent surveys, which show otherwise.

Greater Sunrise contains the largest known gas deposit in the Timor Sea. It is located in an area long claimed by East Timor as wholly within its territory. Around 144 kilometres off the southern coast of East Timor, it is significantly closer to East Timor than to Australia.

Decision delayed

A decision on how the gas was to be processed was due at the end of 2009, but was delayed, allegedly while Woodside finalised its assessment. Over the same period, Royal Dutch Shell, which is a major shareholder in Woodside and holds a 27% stake in Greater Sunrise, was concluding negotiations with Samsung Heavy Industries (the world's third largest shipyard) for the supply of up to 10 floating liquid natural gas processing plants, worth approximately US$5 billion each.

Earlier this year, Gusmao and other representatives of the AMP government publicly reaffirmed its position (and that of the previous Fretilin government) that the gas should be piped to East Timor for processing. In February, Woodside CEO Don Voelte accused East Timor of "negotiating through the newspapers".

Following Woodside's announcement of its intention to proceed with a floating platform and East Timor's immediate rejection of this option, Voelte told the annual shareholders meeting in Perth on April 30: "The citizens of Timor-Leste are all, I suspect, going to wonder why their government doesn't promote something that will improve their lives" and that the decision by East Timor was "premature". A statement released by the East Timorese government in response to the floating platform announcement noted: "Woodside was acutely aware of the government's position before today's announcement, but chose to proceed regardless... This is not only a source of great concern, but reflects an unacceptable level of arrogance."

Unjust treaty

Unsurprisingly, the Rudd Labor government has come out in support of Woodside's proposal, implying that East Timor is not abiding by its legal obligations under the Treaty on Certain Maritime Arrangements in the Timor Sea, signed in January 2006. This unjust treaty exists because Australia refuses to recognise East Timor's sovereign rights under the United Nations Convention on the Law of the Sea.

The May 3 Australian quoted resources and energy minister Martin Ferguson as saying: "The Australian government has consistently maintained that the location of LNG processing is a commercial decision for the Sunrise joint venture... As we have always said, we will carry out our obligations and we expect the Timor Leste government to meet its obligations."

According to the May 7 Sydney Morning Herald, Gusmao sent a private letter to Voelte in which he stated: "[T]here must have been a wrongful interpretation" of the clauses relating to the development of Greater Sunrise.

On May 6, Voelte and a team of Woodside executives travelled to East Timor to seek a meeting with Gusmao. They were met by a vibrant 200-strong rally that prevented them from leaving the airport for two hours. Gusmao refused to meet with them. The East Timorese government also sent a letter to the Australian Stock Exchange, requesting it to instruct Woodside to correct statements the company made about Greater Sunrise in its 2009 annual report and statements made at the company's annual general meeting on April 30. The letter noted that these 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". It added that Woodside had failed to acknowledge that the Greater Sunrise fields cannot be developed without East Timor's consent.

In an interview reported on May 26 on the Bloomberg Businessweek web site, the president of East Timor's independent National Petroleum Authority (NPA) confirmed that Woodside executives walked out of a meeting with the NPA on May 18 after it was explained to them that more detailed reports were provided on all options for processing the gas and assessed and that an in- principle agreement had been reached by East Timor and Australia. NPA president Gualdino Da Silva told Bloomberg: "Woodside and its partners have not done their homework properly".