Australia, E. Timor eye gas agreement

Australia, E. Timor eye gas agreement

Agence France-Prese, Canberra

East Timor and Australia said on Wednesday they were optimistic about completing talks on a controversial revenue- sharing agreement covering disputed Timor Sea oil and gas reserves by the end of the year.

Amid warnings from oil companies that they will walk away from the project if political wrangling drags on into 2005, East Timor Foreign Minister Jose Ramos-Horta and his Australian counterpart Alexander Downer held talks in Canberra.

East Timor has demanded a greater share of the revenue and the issue looked set to become embroiled in Australia's upcoming election campaign last month, after the opposition vowed to start negotiations from scratch because of "bad blood" in the current long-running talks.

The dispute centers on a demand by the fledgling nation that the border be redrawn to half-way between the two countries, increasing its share of the oil and gas revenues.

While the row has sparked strong rhetoric from both sides in recent weeks, Ramos-Horta emerged from the talks saying he was hopeful of a speedy resolution.

"I am optimistic, like Alexander Downer, that we can make significant progress in the next few weeks and months and by the end of the year we could have a comprehensive agreement," Ramos Horta told reporters.

Downer refused to reveal whether Australia had agreed to Timor's demands, as the next formal negotiations are not scheduled to resume until next month.

"I feel we have really made some extraordinarily good progress today and we are heading in the right direction," Downer said. "I think it's doable by the end of the year."

Australia's conservative government has been accused of bullying East Timor by insisting it maintain control over the majority of the oil-rich continental shelf under the terms of a maritime border agreement reached with Indonesia when it controlled the young country.

The dispute is keeping the East Timor government from signing a revenue sharing deal for the field, which is forecast to generate revenues of up to US$21 billion.

Under the agreement, which has been agreed but not ratified by Dili, 80 percent of a gas project called Greater Sunrise falls within waters designated as Australian, leaving East Timor access to just 20 percent.

A second revenue sharing deal allows East Timor to take 90 percent of government revenue from the so-called Joint Petroleum Development Area, which includes only 20 percent of Sunrise, whose fields are considered the most lucrative in the area.

Australian oil giant Woodside Petroleum, the lead developer of the Sunrise field, has repeatedly warned the project will fold if negotiations are not completed promptly because it will be unable to guarantee supply to potential customers.

East Timor, one of the world's poorest nations, says revenue for the Timor Seas fields is the only way it can end its dependence on foreign aid.