Australia and East Timor strike oil, gas agreement

Australia and East Timor strike oil, gas agreement

SYDNEY (AFP): East Timor will receive a multi-billion-dollar
cash injection after Australia conceded the fledgling state
should receive 90 percent of royalties from oil and gas reserves
in the Timor Sea.

Australian Foreign Minister Alexander Downer and Industry
Minister Nick Minchin will travel to East Timor's capital Dili on
Thursday to sign the agreement.

Australia previously shared royalties on an equal basis with
Indonesia but was forced to renegotiate the agreement after East
Timor won its independence in 1999.

The new deal represents a major boost for the finances of the
impoverished new state as it gears up for its first post-
independence elections next month.

The shattered East Timorese economy has been largely propped
up by aid donors, notably Australia, former colonial power
Portugal and the United Nations.

The foreign envoy of East Timor's interim administration,
Nobel peace laureate Jose Ramos-Horta, said the "historic"
agreement would generate A$400 million (US$208 million) over the
next three years.

"Without this kind of money we would not be able to generate
employment," he said.

"Obviously in the first few years of independence it's very
important that there will be jobs to stabilize the situation."

As more projects come on line from 2004, the Australian
government estimates that East Timor will receive "substantially
more" than A$7 billion (US$3.64 billion) over the next two
decades.

"It will be a way of giving some revenue to the new country,
which is going to be a very poor country and will need a lot of
assistance," Australian Prime Minister John Howard said.

Downer told the Australian Broadcasting Corporation the
government "took the view that we wanted to be generous to East
Timor because it's in our interests that East Timor does have a
good and steady flow of revenue from the Timor Sea oil and gas
reserve".

Australian and East Timorese officials, monitored by the
United Nations, reached agreement late Tuesday after 12 months of
protracted negotiations.

One of the commercial driving forces behind efforts to tap oil
and natural gas reserves in the Timor Sea separating the two
countries, US-based Phillips Petroleum, hailed the deal.

"It was a fundamental requirement -- we certainly welcome this
agreement and this development," said senior Phillips Petroleum
executive Jim Godlove.

"It is our hope this framework agreement will provide a secure
legal and fiscal level that supports continued investment," he
told AFP.

Phillips has interests in the Sunrise, Elang-Kakarua and Bayu
Undan projects.

Australian government projections estimate the Bayu Undan and
Sunrise projects will generate a combined total of 5.2 trillion
cubic feet of natural gas and 721 million barrels of oil and
liquid petroleum gas.

However, just 20 percent of the Greater Sunrise project is
located in the area governed by the agreement, while neighboring
operations are regarded as significantly smaller.

After 24 years of guerrilla warfare following Indonesia's 1975
invasion, East Timor's economy was devastated by pro-Indonesian
militia violence in the wake of the 1999 independence referendum.