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Statement on the East Timor-Australia maritime agreement
East Timor and Indonesia Action Network (ETAN) - January 15, 2006
The new treaty between the governments of Australia and Timor-Leste to share oil and gas resources from part of the Timor Sea temporarily resolves a long-standing and difficult dispute. However, the East Timor and Indonesia Action Network (ETAN) believes this agreement does not fully serve the rights and interests of the people of Timor-Leste.
Unfortunately, the deal may be the best that could be achieved at this time, given the pressures on Timor-Leste from Australia and oil companies and the tremendous economic, political, size and other disparities in an inherently unequal negotiation process.
The Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS), signed in Sydney on January 12, apportions government revenues from extracting gas and oil from the Greater Sunrise field equally between the two countries, notwithstanding that the field is twice as close to Timor-Leste as Australia. Tellingly, it defers the more intractable issue of a permanent maritime boundary for half a century or more, until all petroleum resources in the Timor Sea are likely to be exhausted.
This agreement prolongs Australia's refusal to recognize the sovereign rights of the people of Timor-Leste, a position which began when Australia encouraged Indonesia's invasion in 1975, became blatant when Australia and Indonesia divided Timor-Leste's petroleum resources in 1989, and continues in Australia's occupation of now-independent Timor-Leste's maritime territory.
Although the government of Timor-Leste is temporarily acceding to this occupation, ETAN joins with many in Timor-Leste in the belief that the struggle for independence remains incomplete without definitive boundaries accepted by their neighbors. We are also troubled by the permanent nature of some of the provisions, especially those which prevent the use of courts or other impartial mechanisms for resolving disputes.
Under this agreement, Timor-Leste and Australia will each receive half of the "upstream" revenues from Greater Sunrise, money from extracting and selling petroleum resources at the wellhead.
Allocation of the "downstream" revenues from refining, liquefying or processing the oil and gas is yet to be determined, and each country wants Sunrise gas be piped to its shore for liquefaction. We hope that Australia and the oil companies, especially Woodside, will show greater respect for Timor-Leste's rights when they make this decision than they have to date.
ETAN and many international law experts point out that Bayu-Undan, Greater Sunrise and other petroleum fields which are closer to Timor-Leste's coast than to Australia's should belong 100% to Timor-Leste under current international legal principles. Instead, Timor-Leste is receiving 90% of the revenue from Bayu-Undan. Another field closer to Timor-Leste, Laminaria-Corallina, has provided the Australian government with more than a billion dollars since it began production six years ago; Timor-Leste has received nothing. Australia's blatant theft of this oil fueled public anger at its unfair treatment of its new neighbor, but under the new agreement Australia will continue to profit from Laminaria-Corallina.
Over the last three years, Timorese negotiators, bolstered by pressure from people in Timor-Leste, Australia, the United States and elsewhere have shifted the Howard government from accepting Timor-Leste's right to 18% of Sunrise to conceding 50%. Although this is still less than Timor-Leste is legally entitled to, the additional 32% will help Timor-Leste end its status as the poorest nation in Asia. ETAN believes that Timor-Leste could have gained more by holding out longer -- worldwide and grassroots pressure on Australia was only beginning to be effective. Income from the Bayu-Undan field is already surpassing Timor-Leste's current financial needs, and will do so for the next 15 years. During that time, petroleum prices will surely rise, natural gas will become more important globally, environmental and pipeline technology will improve, and Timor-Leste will gain experience in managing oil and gas projects and revenue. Although Australia and the oil companies wanted to reach a Sunrise agreement quickly, there is no urgency for Timor-Leste.
This agreement resolves some issues while finessing others. Although it clearly defers maritime boundaries once again to proceed with Sunrise development, the agreement also allows Australia to proceed with contracts and development in other formerly contested areas of the Timor Sea, likely to contain additional oil and gas reserves. Timor-Leste has gained 32% of Sunrise, but it has given up other potentially lucrative areas being explored now or in the near future.
As it has for the past fifteen years, ETAN will continue to campaign for the human, political and legal rights of the people of Timor-Leste. This week's agreement may be a step forward in that process, but the struggle continues.
Background
Vast oil and gas fields lie under the Timor Sea, between Timor-Leste and Australia.
Development of some of these began during Indonesia's illegal occupation of Timor-Leste, which killed tens of thousands of people from 1975-1999. Australia and Indonesia cooperated to profit from these resources, initiating development of the Elang-Kakatua, Laminaria-Corallina and Bayu-Undan fields. The entire disputed (striped) area is closer to Timor-Leste than to Australia, which would put it in Timor-Leste's territory under the principles of the 1982 United Nations Convention on the Law of the Sea (UNCLOS).
During the occupation, Australia and Indonesia divided Sunrise 10% for Indonesia and 90% for Australia. Bayu-Undan and other fields were divided 50-50. After independence, Timor-Leste and Australia agreed that Timor-Leste would receive 90% of Bayu-Undan upstream revenues, while Australia would get 100% of the downstream.
For Sunrise, Australia insisted on 82% of the upstream and all of the downstream revenues, while Timor-Leste demurred, creating a two-year deadlock. Some other parts of the disputed area are currently being explored under Australian licenses (issued despite protests by Timor-Leste), while others have not yet been licensed for exploration. The new CMATS treaty legitimizes the disputed licenses, and gives Australia permission to license other such areas.
Immediately after independence in May 2002, Timor-Leste and Australia signed the interim Timor-Sea Treaty, which allowed development in the Joint Petroleum Development Area to proceed, including Bayu-Undan. The Timor Sea Treaty was "without prejudice" to a future maritime boundary settlement, which was to replace it. The Treaty came into effect in 2003; Bayu-Undan started production in 2004 and already provides more than $6 million to Timor-Leste every month. CMATS prolongs the Timor Sea Treaty by an additional 14 years, or until Sunrise is no longer in production.
In October 2002, Timor-Leste enacted a Maritime Boundary Law, asserting its claim of a 200 nautical mile Exclusive Economic Zone in all directions, based on UNCLOS. Where neighboring claims overlap, as is the case with Timor-Leste and Australia, countries must agree on a boundary, usually halfway between their coastlines. The Australian government preemptively withdrew from maritime boundary jurisdiction of the International Court of Justice and the International Tribunal on the Law of the Sea two months before Timor-Leste's independence, leaving the new republic with no legal recourse if negotiations were protracted or unsuccessful. Under CMATS, both parties agree "not to raise or pursue in any international organization matters that are, directly or indirectly, relevant to maritime boundaries or delimitation in the Timor Sea."
In March 2003, Australia coerced Timor-Leste into signing an International Unitization Agreement (IUA) for the Greater Sunrise field, larger than Bayu-Undan and straddling the Joint Development Area. Under the IUA, Timor-Leste would have received only 18% of upstream Sunrise revenues.
However, Timor-Leste's Parliament refused to ratify the IUA, resulting in the just resolved stalemate. Although approval of the IUA is part of CMATS, Timor-Leste will now receive 50% of upstream Sunrise revenues. Resolution of the maritime boundary has been deferred for 50 years, by which time all Timor Sea gas and oil will likely have been extracted.
Forecasting energy prices one year from now is precarious; predicting for generations ahead is pure fantasy. The increased revenues to Timor-Leste from the agreement could be from two to twenty billion dollars.
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